Brazilian state-owned energy company Petrobras on Thursday reached a coordinated resolution with U.S. and Brazilian authorities, agreeing to pay a combined $853.2 million for playing a role in one of the largest political corruption investigations the world has ever seen.

The saga began when it was discovered that some of Brazil’s largest construction and engineering companies received inflated contracts from Petrobras—excess markups that were then used to funnel kickbacks to Petrobras executives and high-ranking politicians.

“Executives at the highest levels of Petrobras—including members of its executive board and board of directors—facilitated the payment of hundreds of millions of dollars in bribes to Brazilian politicians and political parties and then cooked the books to conceal the bribe payments from investors and regulators,” said U.S. Assistant Attorney General Brian Benczkowski.

According to admissions made by Petrobras, while the company’s American Depository Shares traded on the New York Stock Exchange, members of the Petrobras executive board facilitated and directed millions of dollars in corrupt payments to politicians and political parties in Brazil. Members of Petrobras’ board of directors were also involved in facilitating bribes that a major Petrobras contractor was paying to Brazilian politicians.

During this period, for example, a Petrobras executive directed the payment of illicit funds to stop a parliamentary inquiry into Petrobras contracts, and the executive also directed payments received from Petrobras contractors to be corruptly used to pay millions of dollars to the campaign of a Brazilian politician who had oversight over the location where one of Petrobras’s refineries was being built.

Petrobras admitted that it failed to make and keep books, records, and accounts that accurately and fairly reflected the company’s capitalization of property, plant, and equipment as a result of the bribes being generated by the company’s contractors with the cooperation of certain Petrobras executives, and that certain Petrobras executives signed false Sarbanes-Oxley 302 sub-certifications while they were involved in, and were aware that other executives at Petrobras were involved in, obtaining and facilitating the payment of millions of dollars in bribes to Brazilian politicians, to Brazilian political parties and to themselves.

Petrobras also admitted that certain executives failed to implement internal financial and accounting controls in order to continue to facilitate bribe payments to Brazilian politicians and Brazilian political parties.

Resolving violations of the Foreign Corrupt Practices Act, Petrobras entered into a non-prosecution agreement (NPA) and agreed to pay a criminal penalty of $853.2 million, reflecting a 25 percent discount off the low end of the applicable U.S. Sentencing Guidelines fine range for the company’s full cooperation and remediation.

Parallel proceedings

SEC settlement. In related proceedings, Petrobras reached a settlement with the U.S. Securities and Exchange Commission (SEC) for misleading U.S. investors by filing false financial statements that concealed the massive bribery and bid-rigging scheme. Petrobras erroneously recorded the corrupt payments as money spent to acquire and improve assets, resulting in an estimated $2.5 billion overstatement of assets.

The SEC’s order finds that Petrobras’ false and misleading filings included materially false and misleading statements to U.S. investors in a $10 billion stock offering completed in 2010. The filings misrepresented Petrobras’ assets, infrastructure projects, the integrity of its management, and the nature of its relationships with its majority shareholder, the Brazilian government.

“Petrobras fraudulently raised billions of dollars from U.S. investors while its senior executives operated a massive, undisclosed bribery and corruption scheme,” said Steven Peikin, Co-Director of the SEC Enforcement Division. “If an international company sells securities in the United States, it must provide truthful information about its business operations.”

According to Petrobras, “none of those individuals remain employed by or associated with the company.”

Brazil settlement. Petrobras also entered into a settlement agreement with the Ministerio Publico Federal in Brazil, as the underlying facts were uncovered in the investigation by the Brazilian authorities in Operation Car Wash (“Lava Jato”).

Under the NPA, the United States will credit the amount that Petrobras pays to the SEC and Brazil under their respective agreements, with the Department of Justice and the SEC receiving 10 percent ($85.32 million) each, and Brazil receiving the remaining 80 percent ($682.56 million).

“This case is just the most recent example of our ability to work with our foreign counterparts to investigate companies and other criminal actors whose conduct spans multiple international jurisdictions,” Benczkowski said.

Resolution details

Petrobras has agreed to continue to cooperate with the Department in any ongoing investigations and prosecutions relating to the conduct, including of individuals, to enhance its compliance program and to report to the Department on the implementation of its enhanced compliance program.

The Department said it reached this resolution based on “a number of unique factors,” including that Petrobras is a Brazilian-owned company that entered a resolution with Brazilian authorities and is subject to oversight by Brazilian authorities. Additionally, the Justice Department noted that numerous Petrobras executives engaged in an embezzlement scheme that “victimized” the company.

In announcing the settlement, Petrobras provided further details on this point. “Through Operation Car Wash, Brazilian authorities, including the Brazilian Supreme Court, have affirmed that certain former Petrobras executives and others engaged in a corrupt scheme that harmed and caused severe financial loss to Petrobras,” the company stated. “Petrobras has already recovered more than R$2.5 billion in restitution in Brazil and will continue to pursue available legal remedies from all culpable companies and individuals.”

Furthermore, “the SEC recognizes the company’s status as an Assistant to the Prosecutor in more than 50 criminal proceedings in Brazil,” Petrobras stated. Although Petrobras did not voluntarily disclose the conduct, it did notify the government of its intent to fully cooperate after learning of the allegations of misconduct. Petrobras fully cooperated in the investigation and fully remediated.

Petrobras’s cooperation included:

Conducting a thorough internal investigation and proactively sharing in real-time facts discovered during the internal investigation and sharing information that would not have been otherwise available to the Department;

Making regular factual presentations to the Department;

Facilitating interviews of, and information from, foreign witnesses, and

Voluntarily collecting, analyzing and organizing voluminous evidence and information for the Department in response to requests, including translating key documents.

Petrobras also took extensive remedial measures, including replacing the board of directors and the executive board (the company’s high-level managers) and implementing governance reforms, as well as disciplining employees and ensuring that the company no longer employs or is affiliated with any of the individuals known to the company to be implicated in the conduct at issue in the case.

“The resolution is in Petrobras’s best interest and that of its shareholders,” the company stated. “It puts an end to the uncertainties, risks, burdens and costs of potential prosecution and protracted litigation in the United States.”

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