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Thursday
Jun292017

Rizzo and Moushey on Brazil: What’s Next for President Temer? 

Eloy Rizzo and Leah MousheyOn Monday (June 26), the Head Prosecutor of Brazil’s Federal Public Prosecution Service, Rodrigo Janot, formally accused President Michel Temer of “passive corruption” (i.e., the receipt of bribes) based on the testimony of executives from J&F Group, which controls meatpacking giant JBS.

The Prosecution Service also formally accused the President’s former adviser and former congressman Rodrigo Rocha Loures of passive corruption.

According to the formal accusation, between March and April 2017, Temer used “his status as head of the executive branch and national political leadership” to receive approximately $150,000 from Joesley Batista, president of J&F Investimentos SA. Former Congressman Loures and J&F executive Ricardo Saud allegedly helped to effectuate the payment.   

In exchange, Temer and his associates allegedly agreed to use their influence to benefit J&F in its pending proceedings before CADE (Brazil’s antitrust regulatory body). The accusation also alleges that both Temer and Loures were set to receive up to $11.5 million in future bribes in exchange for asserting political influence to benefit J&F.

The crime of passive corruption, which is codified in Brazil’s Criminal Code, carries a possible base sentence of two to twelve years in prison. In addition, Janot requested that Temer be required to pay approximately $3 million in damages.

Following the accusation, Temer hosted a press conference where he denied all wrongdoing, stating that the accusation is a piece of “fiction.”  This marks the first time in Brazilian history that a sitting President has been charged with passive corruption.

Procedural Next Steps. The accusation will be reviewed by the Chamber of Deputies, Brazil’s lower house of congress. First, the Commission on Constitution and Justice, a committee within the Chamber, will analyze the accusation and Temer will have the opportunity to present his defense.  

The matter will then go to the plenary for a vote. If the accusation is approved by a two-thirds majority, it will be forwarded to the Brazil’s Federal Supreme Court, which may decide to accept or deny the case.

If the Court accepts the case for adjudication, President Temer is obligated to step down for 180 days. In Temer’s absence, the current President of the Chamber of Deputies, Rodrigo Maia, will serve as the interim President of the Republic.

Currently, Rodrigo Maia is the target of another Operation Lava Jato-related investigation for allegedly receiving more than $100,000 in illicit political contributions from Odebrecht officials. Maia has denied all wrongdoing. 

More Accusations to Come? Also on Monday (June 26), the Federal Police submitted an investigative report to the Federal Supreme Court, which may lead to another formal accusation against Temer for obstruction of an investigation of a criminal organization.

The Federal Police’s Report concluded that Temer “hinder[ed] the investigation of criminal conduct carried out by a criminal organization, inasmuch as he encouraged businessman Joesley Batista to continue to make illegitimate payments to Eduardo Cunha [the former President of the House of Deputies who is serving a 15-year prison sentence for corruption], while failing to communicate to competent authorities allegations of corruption by members of the Federal Judiciary and the Federal Public Prosecution Service[,] which were disclosed by the same businessman [Batista].”

The Supreme Court Justice overseeing the case, Edson Fachin, has given the Federal Public Prosecution Service a five-day deadline, which started on Tuesday (June 27), to assert additional accusations based on the Report.

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Eloy Rizzo is a partner at the São Paulo-based law firm of KLA-Koury Lopes Advogados. His practice focuses on anti-corruption issues, compliance, and complex litigation. He oversees internal investigations and due diligence activities related to possible violations of anti-corruption standards, designs and implements compliance programs, and frequently conducts anti-corruption and compliance trainings.

Leah Moushey is an associate in Miller & Chevalier’s International department on a leave of absence. Currently she's working at the São Paulo-based law firm of KLA-Koury Lopes Advogados in the Anti-Corruption, Compliance, and Investigation practice group. Her practice focuses on international corporate compliance, as well as internal and government corruption investigations.