Justice Dias Toffoli’s order allows renegotiation of Odebrecht’s fines, opens way for similar demands by other companies

02/02/2024

Dias Toffoli — Foto: Fellipe Sampaio/SCO/STF

The suspension of the payments of fines within the leniency agreement that contractor Odebrecht—renamed Novonor—signed with the Federal Prosecution Service (MPF) in 2016 as part of the anticorruption task force Car Wash will have a domino effect on the lawsuits of other companies that signed similar protocols after being involved in corruption cases, Valor has learned.

The monocratic decision of Supreme Court Justice Dias Toffoli on Wednesday strengthens the argument of the contractors for a review of the fines signed not only with the MPF but also with other governmental bodies, such as the Federal Comptroller General’s Office (CGU), the Federal Attorney General’s Office (AGU) and antitrust regulator CADE.

Mr. Toffoli’s latest decision follows another one from September, when he also monocratically annulled the evidence from the same leniency agreement with Novonor, which in turn was the basis for a series of Car Wash prosecutions, such as the one that led to the conviction of President Lula, who spent 580 days in jail.

In his order, Mr. Toffoli stated that, given the suspicion of partiality on the part of those involved in the operation, it was important to comply with the company’s request and grant it access to all the messages exchanged between former judge Sergio Moro—now a senator, and whose election is under threat in the electoral courts—and Car Wash prosecutors (evidence that has been the basis for several court decisions in favor of authorities and companies found guilty in the past).

In suspending payments under the leniency agreement, Mr. Toffoli wrote that the contractor’s attorney should be given the opportunity “to assess, in light of the available evidence collected in Operation Spoofing [which investigates the actions of Car Wash prosecutors and judges], whether any wrongdoings were in fact committed.”

Until then, the contractor had access to about 30% of the records. For Mr. Toffoli, the information indicates “collusion between the prosecuting judge and the prosecution service,” which did not allow the parties to fully defend themselves.

Mr. Toffoli also authorized a renegotiation of the terms of the agreement with the Prosecutor General’s Office (PGR), the CGU, and the AGU. In practice, however, these negotiations began about four years ago. According to sources close to the negotiations, the government has not given in to rediscussing the amounts but may extend the cut-off dates and the form of payment, such as the payment of some installments with tax losses.

The global agreement signed by Odebrecht and its executives with the Brazilian authorities was for R$3.8 billion—R$2.7 billion owed to the CGU, the result of a second agreement signed in 2018, which included the 2016 negotiation with the MPF. Mr. Toffoli suspended the installments after this first agreement. Considering fines owed to international authorities, the amount reaches R$8.5 billion to be paid in annual installments over 23 years, adjusted by the key interest rate Selic.

The Novonor Group has not revealed the amount paid so far. Of the R$2.7 billion owed to the CGU, R$172.7 million, or 6.4% of the total, have been paid to date. These data are available on the CGU’s website.

The MPF didn’t answer the question of how much the company has paid so far and doesn’t publish this information. To Valor, the institution said that it “has not yet had official access to the decision” and that “the measures will be analyzed when this happens.” The CGU also said it would evaluate the impact of the decision. CADE did not reply to a request for comment. Novonor has been in court-supervised reorganization since 2019, with debts of R$83 billion.

Last year, Mr. Toffoli took a similar decision concerning the investment holding company J&F, suspending a fine of R$10.3 billion on the grounds that, by signing the agreement with the MPF, the latter had imposed “patrimonial obligations on the group, which justifies the suspension of payments for the time being.” Mr. Toffoli’s wife, lawyer Roberta Rangel, is defending J&F in a dispute with Paper Excellence.

In the new request, which was accepted by the STF, Odebrecht claimed that there were similarities between its cases and those of J&F, so it should receive the same benefit. The company complains of the “abrupt fall in demand in the construction, infrastructure, transport, and mobility sectors, as well as the restriction or almost total closure of access to sources of financing from public and private financial institutions” after Car Wash, and also mentions the “new debt acquired as a result of the agreement’s payment schedule.”

When Mr. Toffoli annulled the evidence in Odebrecht’s leniency agreement with Car Wash last year, the then attorney general Mario Sarrubbo, who will now hold a position in the Ministry of Justice with the newly appointed minister Ricardo Lewandowski, filed an appeal with the Supreme Court to try and reverse the decision. However, the appeal has not yet been analyzed by the Supreme Court.

There are other states that, in the wake of Car Wash, have also signed leniency agreements directly with companies, another point that will also have to be decided by the courts shortly. This is the case in Minas Gerais: three companies—the same Odebrecht, OAS, now Coesa, and Andrade Gutierrez—admitted wrongdoings in the construction of the state government headquarters, signed a leniency agreement with the state (total value R$374 million) and vowed to cooperate with the investigations.

Agreements have also been signed abroad, in the United States and Switzerland, with Odebrecht, but these are outside the scope of the Brazilian judicial decision.

These decisions by Mr. Toffoli are expected to be used by other companies as an argument to obtain the same benefits, lawyers say. “Just as Novonor took advantage of the J&F decision, other companies operating in the same environment and dealing with the same authorities could certainly use the decision to try and suspend payments or renegotiate agreements that they claim were made under pressure or with defect of consent,” said Esther Flesch, a partner at law firm Miguel Neto Advogados who has worked on leniency agreements in Brazil and the United States.

To do this, it is necessary to prove a similarity to the Odebrecht and J&F cases, said lawyer João Fábio Azevedo e Azeredo, a partner at Moraes Pitombo Advogados law firm. “This is already the second decision based on the same premise. Companies that can prove a similar situation can get an injunction,” he said. “It depends on how they prove that similarity.” He said, however, that Mr. Toffoli’s decision still has to be confirmed by the other Supreme Court justices.

Experts are divided as to whether the decisions jeopardize the use of leniency agreements. For Esther Flesch, they do not: “What has happened is a maturing of the practice, because the agreements were made at the time of Car Wash without enough maturity and experience to make them ‘bulletproof’.”

Mr. Azeredo believes that the decisions create legal uncertainty. “The idea of the instrument is to give the company security to do business. And this comings and goings about the legitimacy of the agreement, which is a new instrument, whether we like it or not, creates uncertainty because something that could be settled has the possibility of being annulled by the courts,” he said.

According to lawyer Valdir Simão, a partner at law firm Warde Advogados and former CGU member, there needs to be a comprehensive review of the clauses in the agreements. “We need to check if they have abusive clauses or undue reimbursement headings, for example, whether due to a change in the law or interpretation.” Among the legal changes to be considered, he said, is the non-cumulation of fines under the Administrative Impropriety Act and the Anti-Corruption Act.

The review of all leniency agreements is being discussed in the Supreme Court, reported by Justice André Mendonça, who was head of the AGU in the Bolsonaro administration. The case discusses the “unconstitutional situation” in which the Car Wash negotiations took place.

*Por Marcela Villar, Lucas Ferraz, Isadora Peron — São Paulo, Brasília

Source: Valor International