BUSINESS INTEGRITY AND PUBLIC POLICIES AGAINST CORRUPTION IN BRAZIL MARCELO ZENKNER Public Prosecutor in the State Prosecution Office of Espirito Santo, Brazil Former Control and Transparency Secretary of State Espirito Santo, Brazil Masters Degree in Fundamental Constitutional Rights and Guarantees FDV/ES PhD. Candidate at the Nova de Lisboa University, Portugal Contact: zenkner@uol.com.br SCCE, São Paulo, 08.26.2016 THE COST OF WORLD CORRUPTION FMI (2016): the estimated annual cost of world corruption varies between US$ 1,5 trillion and US$ 2 trillions something close to 2% of the global Gross Domestic Product (amounts related only to bribes actually paid) Source: http://www.imf.org/external/pubs/ft/sdn/2016/sdn1605.pdf, May 2016 1
THE COST OF CORRUPTION IN BRAZIL = 2,3% OF THE BRAZILIAN GDP 840 large size hospitals 8400 public schools 2,1 million public houses 2,4 million police vehicles SOURCE: A GAZETA Newspaper, May 8, 2015 CORRUPTION SCANDALS 2
What are the most serious issues affecting Brazil today? CORRUPTION AND LACK OF GOVERNMENT TRANSPARENCY AND ACCOUNTABILITY = 80,7% OF VOTES What frustrates you the most about government leaders in Brazil? ABUSE OF POWER AND CORRUPTION = 81,8% OF VOTES 3
ERNST & YOUNG 14th GLOBAL FRAUD SURVEY (2016) of entrepreneurs believe that bribery and corruption are a common practice in Brazil http://www.ey.com/publication/vwluassets/ey corporate misconduct individual consequences/$file/ey corporate misconductindividual consequences.pdf Source: LA NACION, Argentina, 20 de junho de 2016 4
The brazilian Government is under increasing pressure from the public opinion to handle the high levels of bribery and corruption in the country Federal Law 12.683/2012: New Money Laundering Law Suppressed the exhaustive list of necessary preceding crimes to money laundering Because of that, nowadays it is enough that the offender is aware that the money was obtained through a criminal act, including misdemeanors, specially Jogo do Bicho (brazilian illegal gambling) Expansion of legal entities obliged to register and communicate money laundering activities 5
Federal Law 12.850/2013: Organized Crime Law plea bargaining agreement environmental capture of electromagnetic, optical or acoustic signs controlled action access to telephone and telematic registries removal of financial, banking and fiscal secrecy police infiltration in investigations cooperation between federal, state and municipal institutions and agencies, in the search of evidence and information that might be useful in an investigation or criminal lawsuit Federal Law 12.846/2013: Corporate Anticorruption Law Strict Liability of legal entities Extraterritoriality Prediction of administrative and judicial sanctions Prevision of leniency agreements Integrity programs as a mitigating factor in sanctions 6
STRONG REGULATION INTEGRITY CULTURE UK S PARLIAMENTARY EXPENSES SCANDAL (2009) 7
CONCEPT OF INTEGRITY COMPANIES OF THE FUTURE PUBLIC ADMINISTRATION 8
IN THE CONTEXT OF CORPORATE GOVERNANCE: INTEGRITY AS A BUSINESS Make or break factor for companies COMPLIANCE PROGRAM INTEGRITY PROGRAM Based in rules and the observance of regulations Based in people and the observance of values To positively impact the world and improve their performances, companies must go beyond the simple checking of compliance exercises 9
84,17% of respondents: Members of Y Generation are willing to pay more for products and services from a company recognized as a Good Citizen Company Source: http://insights.ethisphere.com/global ethics summit survey results/ Y GENERATION : is less focused in a company s financial results and more interested in its potential to do good 25% of respondants: ethics, trust, integrity and honesty are essential values in supporting a business success Source: http://www2.deloitte.com/global/en/pages/about deloitte/articles/millennialsurvey.html 10
69% of consumers are likely to purchase stock in a company well known for its ethicalstandards 75% of consumers said they would be happier to work for a company with a strong CSR program ( Corporate Social Responsibility ) https://www.philanthropy.com/items/biz/pdf/aflaccorporatesocialresponsibility.pdf 2016: the companies recognized as the most ethical in the world overcame in 3,3% the S&P500 2015 11
PETROBRÁS LOST R$ 440 billion in 8 years Devaluation of 85,5% 2008 = R$ 510,3 bilion 2016 = R$ 73,7 billion Bradesco lost R$ 7 bi in 15 minutes Bank stocks dropped 7,33% after the indictment of Luiz Carlos Trabuco in Operation Zelotes, that investigates the buying of CARF administrative decisions Fonte: Valor Econômico, 31/05/2016 12
IN THE CONTEXT OF PUBLIC GOVERNANCE: Public Integrity Policies Governmental legitimization factor The sutil corruption of public goods and services consumes government legitimacy. The corruption in the supply of public goods and services and in the imposition of costs sets a cloud over governments that seek for public legitimacy (Susan Rose Ackerman) O GLOBO, 26 de junho de 2016 13
Tone at the top also in the Public Administration Tolerance to corruption in certain fields of public life encourages more and more people, with time, to board into corruption (Susan Rose Ackerman) Corporate and political corruption in the public machinery must end, as long as...... we do not accept plea bargaining agreements from arrested individuals... A condemned individual may appeal to the superior courts before an arrest order is issued... Car Wash Operation has a date to end 14
FIGHTING CORRUPTION IN BRAZIL: QUIXOTIC ACTIONS Today the production of results still depends on: Personal initiatives Alignment of institutions Territorial jurisdiction Support from superior courts Support from the population A free and acting press YOU CANNOT FIGHT CORRUPTION WITH A STRONG REGULATION ALONE Broad public policies that involve all public entities and guarantee the enforcement of instruments for combating organized crime are necessary: Transparency and prevention policies Strong and independent institutions Social involvement More effective punishment and internal control mechanisms 15
MAIN PUBLIC POLICIES AGAINST CORRUPTION IN ESPIRITO SANTO STATE (2015) If our helmsmen do not quickly perceive the change in wind direction, they will be faded to democratic obsolescence. They will remain, with their outdated values, permanently stuck in the time of oblivion, and condemned to the implacable judgement of history Rodrigo Janot 16
MARCELO ZENKNER State Prosecutor ES zenkner@uol.com.br Marcelo.Zenkner MarceloZenkner 17