Major Brazilian electric utility company settles FCPA violations with SEC for $2.5 million without admitting or denying fault

The SEC has charged Centrais Elétrical Brasileiras S.A. (known as Eletrobras) with violating the books and records and internal controls provisions of the Foreign Corrupt Practices Act.   The Brazilian utilities company, which is majority-owned by the Brazilian federal government, agreed to pay $2.5 million to settle the charges without admitting or denying the SEC’s findings.  According to the order instituting proceedings, former officers of Eletrobras Termonuclear S.A., Eletrobras’ majority-owned nuclear power generation subsidiary ("Eletronuclear"), engaged in an illicit bid-rigging and bribery scheme involving the construction of a nuclear power plant in Rio de Janeiro between 2009 and 2015.  The SEC alleged that construction company executives agreed to pay 2% of the total contract value to officials associated with Eletronuclear, including its former president and other officers, as well as officials of Brazil’s two largest political parties.  In return, the former Eletronuclear officers and others purportedly used their influence to inflate project costs.  The construction companies purportedly funded the alleged improper payments through inflated and sham invoices, which Eletronuclear paid.  The SEC criticized Eletrobras’ “boilerplate” anti-corruption policies and procedures, noting in particular that its code of ethics applied only at the holding company level and not to subsidiaries and special purpose entities like Eletronuclear.  The SEC further criticized its ineffective accounting controls, which were ignored or circumvented, enabling the payment of upfront costs for work not performed.  According to the SEC, material weaknesses in the company's accounting controls allowed the bribery scheme to “flourish[] undetected for years.”

SEC Order

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