U.S. Department of Justice building in Washington, D.C. Photo: Diego M. Radzinschi/ALM

The U.S. Department of Justice has unsealed bribery and money laundering charges against the ex-CEO of a Brazilian company at the center of Operation Car Wash, a massive corruption probe that altered the compliance landscape in Brazil. 

While Jose Grubisich was CEO of Braskem, a Brazilian petrochemical company and subsidiary of global construction conglomerate Odebrecht, he allegedly oversaw a scheme to divert about $250 million of Braskem's money into a secret slush fund that was used to bribe government officials, according to an indictment unsealed on Wednesday. 

Grubisich faces charges alleging conspiracy to commit money laundering and violations of the Foreign Corrupt Practices Act's provisions on anti-bribery and books and records keeping. He pleaded not guilty to the charges. Attempts to speak with his attorney, Daniel Stein of Mayer Brown, were unsuccessful. 

The books-and-records violation, which carries a maximum penalty of 20 years in prison and a $25 million fine, is not a charge that prosecutors often bring under the FCPA, said Michael Weinstein, a former federal prosecutor who now chairs the white-collar defense and investigations department at Cole Schotz. 

Of the three charges, "the unusual one is for books and records violations, which is pretty rare," he said. "I think this is going to give any executive great pause if he is given the opportunity to manipulate or falsify books and records." 

Weinstein added prosecutors have to show that the executive in question not only had a supervisory role over the company's books and records but also was personally involved in falsifying the records. 

"Here, the facts appear to support that the former CEO did all of those things," he said.  

An indictment filed in the U.S. District Court for the Eastern District of New York describes an elaborate "stand-alone bribe department" that operated within Odebrecht for the benefit of the firm and its subsidiaries, including Braskem.  

Grubisich allegedly negotiated and approved bribes to secure a contract for a petrochemical project in Brazil and, in a separate instance, to obtain favorable pricing in contract negotiations with state-controlled oil company Petróleo Brasileiro S.A., better known as Petrobras. 

Grubisich is further accused of falsely recording the bribery payments, which were made to offshore shell companies that Braskem controlled, as "commissions." He also allegedly signed certifications to the U.S. Securities and Exchange Commission in which he attested to the accuracy of Braskem's falsified financial reports. 

The alleged bribery scheme unfolded between 2002 and 2014. Grubisich was named CEO in 2002 and stepped down in 2008, but he continued to serve in other capacities for Braskem and Odebrecht, including as CEO of the firm's ethanol business, while some of the bribes were paid, according to the indictment. 

In 2016, Odebrecht and Braskem pleaded guilty to conspiracy to violate the FCPA's anti-bribery provisions and agreed to pay more than $3.5 billion to resolve what the Justice Department called the "largest foreign bribery case in history."

The corruption probe sent ripples across Latin America, especially in Brazil, where firms began spending far more time on due diligence to uncover potential FCPA violations. 

In an interview earlier this year with Corporate Counsel's sister publication LegalWeek, Rafael Ribeiro, a partner with Hogan Lovells in Miami who handles anti-corruption investigations for clients in Latin America, noted that the "culture of compliance in Brazil—which was practically nonexistent in 2013—has now taken off to a level of professionalism never imagined."

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