Lessons About Corruption From A Judge At The Center Of Operation Car Wash

Over on FCPA Blog they've published an article we wanted to be sure our readers saw. The article comes from Felipe Monteiro a Professor at INSEAD, who has written a case study on the implications of Operation Car Wash for Brazilian businesses. The article on FCPA blog details lessons learned from Brazil's Operation Car Wash, based on comments from Judge Sergio Moro, who has jailed many of those prosecuted by the operation. We thought the article had a lot of good information on the impact of corruption on society and on business.

For example the article covers some of the huge costs from corruption and bribery to business in Brazil:

Building bribes into costs required mind-bogglingly large numbers. For example, the cost for Petrobras’ Abreu e Lima refinery was five times -- $20 billion -- its initial budget. Bribes may not explain 100 percent of the ballooning costs, but according to Judge Moro: “The focus and concerns of executives at Petrobras were not on the welfare of the company but on opportunities to take bribes, not only for them, but for the politicians who gave them their political support so they could remain in their positions.”

The article goes on to cover comments by Judge Moro that the impact of corruption is not just economic:

“The great problem with systemic corruption is not only about economy, about costs,” continues Judge Moro. “The major problem is that it affects confidence. For any nation to work, you need confidence in the government, you need confidence in the markets, and you need confidence in democracy. In an environment of systemic corruption, if you add impunity – and impunity was the rule in Brazil before 2014 with some exceptions, of course – you have a lack of confidence in democracy and in the markets, and in the rule of law.”

Another interesting piece of information from the article is the observation that Operation Car Wash didn't start out as a huge concerted effort to root out systemic corruption. It started small and grew from there as one investigation led to another:

Operation Car Wash didn’t start out as a large, well-planned attack on systemic corruption. He describes how one case in 2014 brought the sprawling nature of the crimes to light. Former Petrobras executive Paulo Roberto Costa turned state’s evidence, outlining a sophisticated bribery framework involving not only the oil company, but other conglomerates and foreign companies, and those in political power. Costa alone returned more than $23 million in bribes.

We have often found the same thing in our investigations. When you find one instance of corruption or wrong-doing, it will often lead you to more.

The article is well worth reading in full. If you are concerned about corruption and how it might impact your business give Smith Brandon International a call to discuss how we can help you. We can help you set up a compliance program, conduct investigations within your company, or due diligence of your suppliers and partners. We can also provide advice on the business culture of a new country you are about to move into. Call Smith Brandon International for a free consultation and see how we can help your business!

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