April 27, 2020

IDB debars Brazilian construction company for alleged bribery offenses

On April 24, 2020, the Inter-American Development Bank (IDB) announced that the IDB, the Inter-American Investment Corporation, and Andrade Gutierrez Engenharia S.A. (AG Engenharia), a Brazilian engineering and construction company, had entered into a Negotiated Resolution Agreement.  Under the agreement, AG Engenharia and 11 of its subsidiaries were debarred from participating in IDB projects for 2 years and 6 months.  Given (i) AG Engenharia’s full disclosure at an early stage of the IDB’s investigation, (ii) AG Engenharia’s full cooperation during the investigation, including providing the IDB with “unhindered access to requested information,” (iii) AG’s Engenharia’s implementation of remediation measures, and (iv) AG Engenharia’s agreement to voluntarily refrain from bidding on IDB Group-financed projects during the investigation, AG Engenharia received “a significantly reduced sanction.”  The press release specifically noted that the Negotiated Resolution Agreement technically set a debarment period of 3 years and 1 month, but that the entities received credit for “a period of voluntary restraint,” meaning the remaining debarment period is for 2 years and 6 months. 

According to the IDB’s press release, the Negotiated Resolution Agreement related to allegations of corruption in connection with four contracts financed by the IDB.  These contracts related to two programs in Brazil: the Estrada Nova Watershed Sanitation Program (PROMABEN) and the Igarapes de Manaus Environmental and Social Programs II, Supplemental and III (collectively, PROSAMIM).  During the investigation by the IDB, AG Engenharia disclosed that in 2011 and 2012, the company had agreed to pay government officials a 7 percent kickback for each contract related to PROMABEN.  To win PROSAMIM contracts in 2009 and 2012, AG Engenharia disclosed that it had agreed to pay between 5-10 percent of each contract to government officials as well as a one-time payment of approximately $11.8 million.

Under the terms of the Negotiated Resolution Agreement, AG Engenharia is required to report on its compliance program “through an existing independent monitor” and to continue to fully cooperate with ongoing IDB investigations, including internal investigations to discover “systemic integrity risks to IDB-financed activities.”  If the company fails to comply with its settlement obligations, the sanctions can continue for 9 years or until conditions are met, whichever is earlier.
The conduct relevant to the Negotiated Resolution Agreement was part of a previous settlement in 2018 with Brazilian authorities.  Under that settlement, AG Engenharia was required to pay more than $381 million in disgorgement, fines and penalties. 

IDB Press Release