The international corruption scandal involving Latin America's biggest construction company, Odebrecht, was called Operation car Wash, but involved the kind of money you don't see at a car wash. Odebrecht has been ordered to pay a two point six billion dollar fine after admitting it engaged in a massive bribery and bid rigging plot, paying secret payments of about seven hundred eighty eight million dollars dating back to at least two
thousand one. That's the biggest penalty ever in an international global bribery case. But it could have been worse. Odebrect agreed in December to pay a four and a half billion dollar penalty. My guests are Andrew Spaulding, professor at the University of Richmond School of Law, and William Burns, professor at Texas A and M University School of Law and the lead author of Money Laundering, Asset Forfeiture and Recovery and Compliance A Global Guide. Andy, what started this investigation?
What got it going? Sure, it's a fascinating story. It started with the suspected was a minor money laundering issue involving an officially at Petrobras Um. They detained him for questioning and and at first, uh, they were asking momly about this more limited matter, but they suspected that he knew more, and so they threw an obstruction of justice
charge at him and he broke uh. He uh, they flipped him in he uh disclosed a number of facts about comprehensive bribery scheme involving the governments, some state and enterprises, and some private companies, including not A BRACT. It's probably the biggest single antikruption enforcement initiative we've seen to date. And William the US prosecutors said that ODO BRACT actually had a stand alone bribery department. Describe how it could
get away with that for years. So I have a unique perspective because my wife's Brazilian were often in Brazil, and if and if you take a step back, you have to understand from the perspective of the of what's called a voting population in Brazil, they they already suspect and they know it's common knowledge that the large Brazilian government and private industry are in cahoots, that they are corrupt, and the politicians traditionally, I mean up until this case,
um it, Brazilian politicians have rarely, rarely, ever spent a day in jail. UM. Brazilian private company people have rarely spent a day in jail. It's it's one out of a thousand with this ode Brecht UM ye, the larger
Petro Brass, which is still ongoing. UM. You have what they know for sure based on based on the testimony and the evidence that that have been uncovered, is that many many, meaning almost all night will they have over one hundred politicians that are under investigation and likely to be charged. But for one copy at all mentioned one hundred politicians were in cahoots to receive vibes and other kickback schemes with not with through Odebrecht, through Auto Breck's
sister called Braskam from Petro Brass, dollars and uh. And when you have the politicians, when you have the private companies and the politicians in Brazil, and this is somewhat familiar to the us UM in terms of the executive department.
But you'll find you know government ministers who become members of Congress or their Senate, which is similar to the U S system UM, who are maybe in the Attorney General's office one year and then in a different tax authority the next year, and they somewhat move around his career of bureaucrats within an elected or an executive branches.
Um Lula, by example, is uh Is whose former president is now a member of the legislative and was appointed minister to try and get out of the corruption charges. And and that did not go through um And and of course his his predecessor was thrown out of office, and uh And and Timors the current but even the current president, Timor is under investigation and and I don't you know, I will charges actually be brought to another story.
But yeah, so Andy explained part of the payment, most of the payment is going to Brazil, some of it's going to the US, and some of it to Switzerland. Explain why those those different countries. And when I understand that this went through a lot of Latin American countries, that's right. And that's really one of the most important
features of this settlement. It's not just the dollar amount, and it's not just that a major Latin American company is exposed to have engaged in corruption that was widely known, as has already been said. What significant is that this is a joint enforcement action involving the United States, Switzerland, and Brazil, and that Brazil has taken the lead on the enforcement action and is therefore collecting most of the
penalty money. Historically, the United States was far and away the leader in enforcing some of these anti international, anti crupt and laws. Part of the success story of the Oderbreck cases that we have seen Brazil now take the lead in enforcing anti cruption laws in the country which very much needs it, and is becoming a leader regionally, helping to coordinate enforcement with many other Latin American countries
where ODO BRAC has allegedly paid bribes. So this really is a global enforcement action led largely by Brazil, and that I think signals a new era in which other countries besides just the United States, are are taking the lead in enforcing these laws. William I mentioned that it was initially a four point five billion dollar penalty. How did Odebreck manage to get it down to two point six billion? Yes, so this is another unique aspect which
which is the right thing to do. Everyone remembers author Anderson and and uh and that was a criminal charge and it wouldn't solve it, and it caused a lot of pain for the United States and foreign economies. So Ode Breck similar situation where it it agreed that it was you know, the most egregious, UH, it would help with the further investigations at a four point five billion, but they made a side agreement that said based on ability to pay. And in fact, right now there's still
an ongoing audit by KPMG. UM two fold audit. One is on is just checking again the audit the ability to pay, But two is UH is to root out the other corruption and Ado Brick and well, at least odo Brecks cooperating petrograss is but to some limited degree, UM the audits late. But um ode brect. If you look at the financial situation of this private company, it
it's CEO is in prison for nineteen years now. He's signed a plea deal, so we don't know how much evidence he's going to be providing against the hundred politicians I mentioned Number two. It owes ten billion dollars on the market. Most of that money is US debtors. So it's in the US interest to UH to work with Odebrecht, you know, the government interest to work with Autobrex so that Odo Breck survives, is an operating entity to be able to pay back that ten billion dollars. And they're
they we're doing a workout. It's been reported in your Bloomberg itself, but that that workout is going to take you know, many many many months to to come to fruition. And UH go ahead. So so andy, UM, just in about forty five seconds here, what's happening now with odo Breck. Have they put anything into place to try to see that they comply that this doesn't happen again? Yeah, Well, generally, as the condition of these enforcement actions, the company is
required to adopt new compliance measures. Uh and UH and that's important. Uh and and these requirements will be imposed not just by the United States, but by the other jurisdictions Brazil, including included of course in Brazil. Is is now in the midst of of developing a very strong compliance culture within the country and and and and a
compliance industry. So I think we will see uh autorect practices clean up in the future, not least of which because it's now under investigation by a number of countries and it's losing business. Um in dramatic fashion. I'm sure we're gonna hear a lot more about this. Thank you both. That's Andrew Spaudling, Professor at the University of Richmond School of Law, and William Burns, Professor at Texas A and M's University School of Law. That's it for this edition
of Bloomberg Law. Thanks to our technical director Charlie Volmer and our producer David Sutcherman.