CADE signs agreement with construction company Camargo Corrêa in the investigation of Petrobras’ bid rigging cartel
Cease and Desist Agreement
The Tribunal of the Administrative Council for Economic Defense – CADE authorized, in the public hearing of August 19, 2015, the signature of a Cease and Desist Agreement (TCC in its acronym in Portuguese) with the construction company Construções e Comércio Camargo Corrêa S/A – CCCC and the two former employees, Dalton dos Santos Avancini (former President) and Eduardo Hermelino Leite (former Vice President), in the proceeding that investigates an alleged cartel in the market of civil engineering works and industrial assembly in the sector of onshore oil and gas in Brazil,specifically in the public bids of Petróleo Brasileiro S/A – Petrobras. The agreement was negotiated by CADE’s General Superintendence – SG/CADE.
By the agreement, the parties must collect pecuniary contribution of more than BRL 104 million, the highest one ever established under a TCC signed with CADE.
The investigation of the alleged cartel by CADE, inserted in the context of Operation “Carwash”, has been carried out in the ongoing Administrative Inquiry by the SG/CADE and benefited from the signature of a leniency agreement with Setal Engenharia e Construções, SOG Óleo e Gás and employees of group Setal/SOG in March of 2015. The leniency agreement was signed conjointly with the State Public Prosecutor’s Office of Paraná – MPF/PR (the Operation “Carwash” Task Force). The information gathered through the agreement pointed out evidence of cartel in public bids of Petrobras involving several construction companies, including Setal/SOG and CCCC.
The leniency agreement, foreseen in Article 86 of Law No. 12.529/2011, is available for the first-in company, which must cease its involvement in the conduct, confess its guilty, and cooperate fully and permanently with the investigation by identifying other parties involved and gathering evidence and relevant information to prove the infringement. Successful leniency applicants may receive full immunity from administrative sanctions at CADE and, once the agreement it is signed jointly with the Public Prosecutor’s Office, applicants may also be granted with either full or partial immunity in the criminal sphere.
The TCC, by its turn, foreseen in Article 85 of Law No. 12.529/2011 and in Article 185 of CADE’s Internal Statute (RICADE, in its acronym in Portuguese), is a type of agreement available to the second-in companies. TCC in cartel cases requires similar obligations as for leniency: the signatory must cease its involvement in the conduct, recognize its involvement in the infringement, and effectively collaborate with the investigation.
However, contrary to leniency, TCC does not grant criminal immunity for the signatories, nor enables full immunity from administrative sanctions at CADE, being mandatory the collection of pecuniary contributions to the Difuse Rights Fund (FDD in its acronym in Portuguese). According to Article 187 of RICADE, when fulfilling the requirements established, the first company to propose a TCC to CADE can benefit from a reduction between 30% and 50% in the fine that would be imposed to it, depending on its collaboration with the investigation.
Between 2014 and 2015, CADE has signed more than 50 TCCs in cartel investigations, which reduced administrative costs, avoided the judicial review, brought relevant collaboration to the investigations, and resulted in the collection of substantial pecuniary contributions. From 2014 until July 2015, CADE collected more than BRL 344 million to FDD in pecuniary contributions stemming from TCCs.
Confession and collaboration – This is the first TCC signed in the context of the Petrobras’ public bid cartel investigation. Both Construções e Comércio Camargo Corrêa and its former employees confessed their participation in the conduct. Therefore, this is the second company involved in the alleged cartel to confirm the occurrence of the anticompetitive infringement previously confessed by Setal/SOG in the leniency agreement. The CCCC is one of the biggest companies that took part in the alleged collusion, the so-called “VIP Club” and “G6”.
The signatories offered relevant collaboration to the investigation, confirming facts and bringing new evidence. The reported information and presented documents corroborate several information gathered through the leniency agreement signed with Setal/SOG and brought to light new evidence unknown by CADE up to the moment.
CCCC’s contributions were pointed in an order presented by CADE’s President, Vinicius Marques de Carvalho, who voted in favor of the TCC signature. According to Carvalho, “it is worth highlighting the use of specific expressions by the parties of the alleged collusion, which will certainly help the assessment of the evidence already gathered by the Superintendence; new packages of works hitherto unknown, which were targeted by the alleged cartel; details of documents of third parties seized in the headquarters of the investigated companies, (…); new documents regarding meetings and arrangements of the “VIP Club”, which were not related to its functioning since the Lenient was not part of the group; the inclusion of individuals and legal entities as participants of the alleged conduct, about whom CADE had no previous knowledge”.
Furthermore, the TCC was signed at the initial assessment stage of the anticompetitive conduct, thereby helping in the comprehension of the facts and infringements committed.
See the public version of the History of Conduct accompanying the TCC.
Leniency Plus and Discounts – On 31 July 2015, CADE and MPF/PR signed a leniency agreement with CCCC and former employees, in which the signatories confessed their participation in another alleged cartel in public bid of Eletrobrás Termonuclear S/A – Eletronuclear, related to the market of electromechanical assembly of the Angra 3 nuclear plant.
According to Articles 87(7) and 87(8) of the Law No. 12.529/2011, companies and individuals who do not qualify for leniency of a certain cartel, but offer information about another cartel of which CADE has no prior knowledge, can obtain all the benefits from leniency in regards to the second infringement and a reduction of one third of the applicable sanction in regards to the first infringement, depending on its cooperation with the investigations. This modality is known as Leniency Plus.
By bringing to CADE’s attention an alleged cartel in Angra 3 and by confessing its guilty and collaborating to both investigations, the CCCC qualified for the application of the pecuniary reduction in the TCC signed in the investigation of the alleged cartel in Petrobras in addition to the pecuniary reduction derived from the Leniency Plus signed in the investigation of the cartel in Angra 3.
The discount under Leniency Plus results in legal reduction of one third of the applicable sanction. For the TCC, it was applied a reduction of 40% on the expected fine, acknowledging the relevant contribution, but that lower than the maximum discount of 50% that can be granted. Considering the non-cumulative, but subsequent application of the discounts (Leniency Plus and TCC), the company was granted a reduction of 60% of the expected fine, taking into consideration the effective collaboration with the SG/CADE in the investigation of two different cartels with a high potential of harmful effects.
It was understood that the total reduction of 60% is, by one side, not excessively higher than reductions usually granted by CADE in TCCs in cartel cases, often reaching the maximum of 50% allowed by RICADE. At the same time, it is higher enough to compensate for the unusual fact that the company not only collaborated with the investigation of the cartel in Petrobras, but also brought to CADE’s attention a second cartel in Angra 3 power plant.
Applied pecuniary contribution – In order to set the pecuniary contribution to be collected by the CCCC, the company’s annual revenue in the market affected by the cartel – in this case, the market of oil and gas – was used as the basis of calculation of the expected fine. Then, the rate of what would be the expected fine in case of condemnation was applied. During the negotiation the application of the 20% rate was established, the maximum allowed by the Brazilian Competition Law, which is consistent with the seriousness of the alleged cartel and its impacts in the Brazilian society.
After the application of the discounts, a pecuniary contribution of more than BRL 104 million was set, which represents the highest one ever established under a TCC signed with CADE.
The SG/CADE also took into consideration the fact that the two former employees who signed the TCC also signed collaboration settlements with the MPF/PR (Operation “Carwash” Task Force), agreed to pay civil damages, were convicted and serve home prison and had their work contracts terminated, which reinforces the deterrent intent of the measure.
With the signature of the TCC, the investigative proceeding will be suspended regarding its signatories until the obligations are fulfilled.
Next steps – The contributions brought to CADE by the TCC will be added to the ones from the Leniency Agreement signed with Setal in March of 2015, and to other evidence being collected and assessed by the SG/CADE, including materials produced in the ongoing criminal investigation in the Federal Justice of Paraná, such as those from dawn raids carried out by the Public Prosecutor’s Office and the Federal Police.
After the analysis of all the elements, the SG/CADE will decide on the opening of an administrative proceeding, in which the evidence of the infringement and the accused legal entities and individuals will be notified to present their defenses. At the end of the evidentiary stage, the SG/CADE will issue an opinion either for the condemnation or for the filling of the cases regarding each defendant. The conclusions will be submitted to CADE’s Tribunal, which is responsible for the final decision.
The TCC does not produce effects or grant benefits to the companies or individuals in the context of the investigations conducted by the Public Prosecutor’s Office and by the Federal Police in the criminal sphere, or by other administrative authorities. However, it is worth noting that both Dalton dos Santos Avancini and Eduardo Hermelino Leite signed agreements of collaboration in exchange for criminal immunity with the Public Prosecutor’s Office.