Worldwide: Peru And Argentina: New Bribe Regimes Put Companies At Risk

In response to fallout from the Odebrecht scandal, which began in Brazil in 2014 and swept through Latin America, and aided by shifting political winds, Peru and Argentina have recently enacted significant corporate anticorruption legislation. The impact of the Odebrecht scandal—in which Peru's former president, Alejandro Toledo, was accused of accepting $20 million in bribes from Brazilian construction giant Odebrecht in exchange for infrastructure contracts—has been profound, leading to investigations of corruption involving Odebrecht as well as other actors across the public sector.

In Peru, for example, three former presidents, among various other public officials, have been accused of accepting payoffs and are under varying levels of investigation, whereas the current president, Pedro Pablo Kuczynski, barely survived an impeachment attempt in December 2017 for the same reasons. Similarly, in Argentina, former economy minister and vice president Amado Boudou was recently arrested on racketeering and money laundering charges, former planning minister Julio De Vido was imprisoned in October 2017 on corruption charges, and a federal judge indicted ex-president Cristina Kirchner, calling on Congress to remove her immunity as current senator so that she may also be prosecuted.

In response to widespread protests and increasing evidence of government corruption, both Peru and Argentina have enacted laws establishing a corporate anticorruption regime, expanding the existing framework of individual criminal liability to independent liability for the corporations themselves. In Peru, the new legislation became effective on January 1, 2018; Argentina's goes into effect on March 1, 2018. By enacting these measures, Peru and Argentina have demonstrated an increased commitment to combat global corruption and to comply with international anticorruption standards, including the Organisation for Economic Co-operation and Development ("OECD") Convention on Combating Bribery of Foreign Public Officials.

This White Paper provides a summary of the key provisions of the new anticorruption statutes in Peru and Argentina, as well as certain developments and characteristics that companies with a presence in these countries should strongly consider as they prepare for enforcement.

PERU

In 2016, Peru passed Law No. 30424, introducing a new corporate criminal liability regime for foreign bribery. In an effort to support its accession efforts to the OECD and improve compliance with other international commitments, and, no doubt, in response to increasing revelations of government corruption, Peru also passed Legislative Decree No. 1352, effective January 1, 2018, significantly amending and expanding the scope of Law No. 30424.

Under Law No. 30424 and Legislative Decree No. 1352 (together, the "Corporate Corruption Acts"), corporations may be investigated, prosecuted, and penalized for committing the crimes of transnational and domestic bribery of public officials or servants, as well as money laundering and financing of terrorism. The corporate liability contemplated by these provisions is autonomous; that is, it applies independently of any prosecution or conviction of an individual. If convicted, companies may be subject to fines of up to six times the benefit expected from the commission of the crime, complete debarment from government contracts, and even dissolution.

However, companies may be exempt from liability if, for example, they demonstrate the existence of an adequate compliance program or show that the prohibited conduct was not committed under the orders or authorization of company partners, directors, or administrators. The Securities Market Superintendency, or "SMV" in Peru, is the government agency responsible for evaluating the adequacy of compliance programs. Although the SMV previously estimated that further regulations would be released by the end of December 2017, recent reports state that such regulations are still pending. Nevertheless, the Corporate Corruption Acts provide a minimum set of requirements for compliance programs, which companies should utilize in the meantime. In addition, where complete defenses to liability are inapplicable, companies also have a variety of options for potential leniency, such as cooperating with the prosecuting authorities and remedying any resulting harms.

Key Provisions

Application and Jurisdiction. The Corporate Corruption Acts apply to the following legal entities: private law entities, associations, foundations, nongovernmental organizations, nonregistered committees, de facto companies, administrative bodies of autonomous states, state-owned companies, and partially state-owned companies. These legal entities are liable when the prohibited conduct is committed in their name or on their behalf, whether directly or indirectly, by: (i) their partners, directors, de facto or legal administrators, legal or attorneys-in-fact, or affiliates or subsidiaries; (ii) a natural person subject to the authority and control of the persons mentioned in (i) above, who committed the offense under their orders or authorization; or (iii) a natural person whose commission of the crime was possible because the persons mentioned in (i) above failed to properly supervise or monitor the entrusted activity.

Parent companies may be sanctioned whenever the natural persons of their affiliates or subsidiaries have committed the prohibited conduct under the orders, authorization, or with the consent of the parent company. However, legal entities are not liable in cases where the natural person committed the offense(s) exclusively for his or her own benefit, or for the benefit of a third party. In addition, the Corporate Corruption Acts in Peru provide for successor liability. In the case of a merger or spin-off, the acquiring or resulting company can be sanctioned only with a fine (unless the merger or spin-off was done with the intent of avoiding criminal liability, in which case this limitation does not apply). Significantly, the legal entity can avoid liability entirely by implementing an adequate compliance program prior to the merger or spin-off, pursuant to the requirements summarized in "Adequate Compliance as a Complete Defense to Liability," below.

Prohibited Conduct. Under the Corporate Corruption Acts, legal entities may be prosecuted for the following crimes, defined in the Peruvian Penal Code:

  • Active Transnational Bribery. Offering, promising, or providing any gift or advantage to a public official of a foreign government or of a public international organization, in order to obtain or retain business or any other improper advantage in conducting international economic or commercial activities. This mirrors the prohibitions in the Foreign Corrupt Practices Act ("FCPA") and the UK Bribery Act, demonstrating further convergence with global anticorruption standards.
  • Generic Active Bribery. Offering, giving, or promising a donation, advantage, or benefit to a civil or public servant in exchange for them performing, or failing to perform, acts that either comport with or violate his or her official duties. Notably, this provision (along with Specific Active Bribery, below) relies in part on a quid pro quo concept and includes donations on the list of potentially prohibited conduct. As in the United States and the United Kingdom, charitable contributions have become an increasing focus of anticorruption enforcement actions. Companies should take special care to ensure that their donations are made with the proper purpose and to legitimate entities only.
  • Specific Active Bribery. Offering, giving, or promising a donation, advantage, or benefit to a magistrate, prosecutor, expert, arbitrator, member of the administrative tribunal, or someone in a similar position, with the intent to influence his or her decision on a matter that has been submitted for his or her consideration. The likely purpose of this measure is to strengthen the independence of the judiciary and of the prosecuting authorities.

In addition, the Corporate Corruption Acts impose corporate criminal liability on entities that finance terrorism and engage in money laundering.

Penalties

Administrative Fines. Entities may be liable for up to six times the benefit obtained, or expected to be obtained, from the commission of the bribery. This is similar in concept to the U.S. Alternative Fines Act, which allows a court to increase FCPA-mandated fines up to twice the amount the offender stood to gain from the illicit conduct, but it triples the potential exposure. If this benefit cannot be quantified, however, the Corporate Corruption Acts provide a mechanism for calculating the amount of the fine based on the organization's annual income. For example, if the organization's annual income exceeds 1,700 tax units (in 2017, approximately US$2,139,169), the fine is at least 500 (approximately US$629,167) and not more than 10,000 (approximately US$12,586,995) tax units.

Judicial Penalties. In addition, entities may be subject to various judicial penalties, including suspension of the company's activities for at least six months and up to two years; temporary or permanent prohibition from engaging in the same types of activities as those in which the crime was committed, facilitated, or concealed; debarment from government contracts; cancellation of licenses, rights, or other administrative or municipal authorizations; permanent or temporary closure of establishments or facilities; and even dissolution. In determining whether any of these penalties apply, the judge will consider a range of factors, including the severity of the conduct, the economic capacity of the legal entity, the extent of the danger or damage caused, the economic benefit obtained from the commission of the crime, the motive for the commission of the crime, and the position held by the individual(s) who violated their duties within the entity.

Mitigating Circumstances. The following factors may mitigate the liability of the legal entity: substantive cooperation in the investigation of the criminal act; preventing the materialization of any harmful consequences of the crime; the total or partial repair of the damage; the adoption and implementation, prior to trial, of a compliance program (see below for how this may operate as a complete defense to liability); and a voluntary confession.

Aggravating Circumstances. The existence of specific unit or group within the legal entity whose purpose or activity is unlawful constitutes an aggravating circumstance. In addition, where the legal entity commits any of the crimes included in these provisions within five years after judicial penalties have been imposed, the judge may increase or extend these penalties up to one half above the legal maximum provided.

Adequate Compliance as a Complete Defense to Liability Corporate Compliance. An organization found to have committed any of the offenses under these provisions is exempt from liability if, prior to the commission of the offense, it adopted and implemented a corporate compliance program appropriate to the nature, risks, needs, and characteristics of the entity, and consisting of surveillance and control measures intended to prevent these crimes or to significantly reduce their commission. Such a program must consist of at least the following elements: (i) a person in charge of prevention, appointed by the highest administrative body in the organization; (ii) identification, evaluation, and mitigation of risks to prevent the commission of the aforementioned crimes; (iii) implementation of complaint procedures; and (iv) dissemination and periodic training on the prevention model.

ARGENTINA

On November 8, 2017, the National Congress of Argentina passed the Law on Corporate Criminal Liability ("CCL"), creating an anticorruption corporate liability regime and bringing Argentina into compliance with its obligations under the OECD. The CCL will become effective on March 1, 2018. As with the statutes enacted in Peru, the CCL introduces corporate criminal liability for various forms of corruption, similarly operating autonomously and independently of any individual prosecutions or convictions. The CCL mirrors the regime in Peru in criminalizing domestic and transnational bribery, but also expands corporate liability to potentially related conduct, such as false accounting and influence peddling. Moreover, the CCL provides a defense to liability based on an adequate compliance program, although, unlike Peru, it also requires the entity to have detected and reported the crime as a result of its own voluntary investigation. In addition, companies may be exempt from liability if they can show that the person who committed the offense acted solely for his or her own benefit. They may also mitigate their liability up to 50 percent of the minimum fine by entering into a cooperation agreement with prosecuting authorities, which creates a significant set of obligations. Argentina will likely release additional guidance on enforcement of the CCL after receiving the results of an OECD Integrity Review later in 2018.

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