In 2017, the construction companies UTC Engenharia S.A, Constran S.A. – Construções e Comércio and UTC Participações S.A., all in the same economic group, entered into a leniency agreement with the Office of the Comptroller General (CGU) and the Office of the Attorney General (AGU) after involvement in Petrobras’ corruption scandal investigated by the Lava Jato Operation. In exchange for collaborating with the authorities, the UTC group obtained several advantages, such as the reduction of applicable penalties and the possibility of continuing to contract with the government. In the agreement, the companies of the UTC Group acknowledged its participation in the corruption scheme and committed to pay BRL 574 million in fines and disgorgement to public authorities, in addition to adopting internal measures to prevent the occurrence of new offenses.
However, on November 21, 2022, after the default in the payment of an installment, what was verified through Administrative Proceeding n. 00190.106496/2019-52, the CGU and the AGU decided to terminate the leniency agreement with the UTC group companies, all of them under judicial reorganization.
As a result, the total loss of the benefits established in the leniency agreement was determined, resulting in the following consequences for the UTC group: (i) the early maturity and execution of the debt arising from the leniency agreement, discounting the amounts already paid; (ii) the execution of the total amount of the fines provide for in Law 12. 846/2013 (Anticorruption Law), without incurring the agreed reductions; (iii) the need for full payment of the estimated profit, plus the amount related to the bribes paid; (iv) the incidence and execution of the fine provided for in art. 12 of Law 8. 429/1992 (Administrative Improbity Law), corresponding to one and a half (1.5) times the total amount referring to the estimated profits and bribes; (iv) the prohibition to contract with the public authorities or receive benefits or tax or credit incentives, directly or indirectly, even if through a legal entity of which it is the majority shareholder, for a period of five years; (iii) immediate inclusion in the National Register of Punished Companies – CNEP, with a detailed description of the respective breach; (iv) the impossibility of entering into a new leniency agreement, for a period of three years and; (vi) the declaration of ineligibility to bid or contract with the Public Administration.
According to CGU calculations, considering fines for non-compliance with interest, the overall value of the termination will cost to the group approximately BRL 2.5 billion. In order to reverse this situation, UTC filed an Administrative Request for Reconsideration with suspensive effect. On December 7, 2022, after deliberation by the CGU and AGU, the decision to terminate the leniency agreement of the UTC group had its effects suspended until judgment of the merits of the appeal.
The termination of the leniency agreement of the companies of the UTC group reignites a discussion raised about two years ago by other contractors that entered into leniency agreements with AGU, CGU, and the Federal Public Prosecutor’s Office (MPF) in Lava Jato Operation: the review and renegotiation of such instruments. One of the arguments supporting such movement is that the payments should follow the payment capacity of the companies, which has been drastically affected since 2014, the beginning of the Lava Jato Operation, due to the reduction in demand with the crises of 2015, 2016, and 2020 as well as with the drop in the volume of investment in public works in the country. As an example, J&F, the holding company that owns the meatpacking company JBS, recently filed a request in court to review the leniency agreement signed in 2017 with the Federal Public Prosecutor’s Office in which it committed to pay a fine of BRL 10.3 billion over 25 years, alleging illegalities in the calculation of the fine. To date, only about BRL 2 billion has been paid.
The recent Decree no. 11,129, of July 2022, which altered the regulation of the Anticorruption Law, allows exceptional revisions of leniency agreements, if the following requirements are present, as provided in its article 54: (i) maintenance of the original results and requirements on which the leniency agreement was based; (ii) greater advantage for the public administration, so that better consequences for the public interest are achieved than the declaration of non-compliance and the termination of the agreement; (iii) unpredictability of the circumstances giving rise to the request for modification or the impossibility of complying with the conditions originally agreed upon; (iv) good faith of the cooperating legal entity in communicating the impossibility of complying with an obligation before the expiration of the deadline for its fulfillment; and (v) soundness of the guarantees presented in the agreement. Furthermore, the request’s analysis will consider the degree of compliance by the legal entity with the other conditions agreed upon, including the adoption or improvement of the integrity program.
For more information, please contact Saud Advogados.