Another sky-high settlement: Airline fined more than US$150m for FCPA violations

On September 15, 2022, the Department of Justice (DOJ) and the United States Securities and Exchange Commission (SEC) announced that GOL Linhas Aéreas Inteligentes S.A. (GOL), an airline headquartered in São Paulo, Brazil, agreed to pay more than US$150m to resolve parallel investigations by criminal and civil authorities in the US and Brazil, stemming from conduct relating to improper payments to secure favorable legislation. As an issuer on a US stock exchange, GOL is subject to the Foreign Corrupt Practices Act (FCPA). This is the second international FCPA action in as many years against an airline, the first being the record-breaking US$3.9bn settlement with Airbus SE. The Justice Department and GOL entered into a three-year deferred prosecution agreement (DPA), to settle claims of conspiracy to violate certain provisions of the FCPA, including the Act's anti-bribery and books and records provisions. Based on the applicable sentencing guidelines, GOL could have been liable for over US$150m in fines, owing the DOJ US$87m and the SEC US$70m. Due to GOL's demonstrated inability to pay, however, both agencies agreed to reduced penalties, with US$24.5m in fines to the SEC and US$17m in criminal penalties owed to the DOJ. The government's resolution of this case reflects the severity and pervasiveness of the conduct, as well as the DOJ's fervent commitment to weed out fraud and corruption in corporations operating within the US no matter how large these corporations may appear in their home jurisdictions. It should not escape notice that both of these actions targeted the aerospace industry, an industry that has faced tremendous stress over the last two years.

The conduct

According to the DPA, between 2012 and 2013, GOL conspired to pay approximately US$3.8m to foreign officials in Brazil in exchange for the passage of legislation that would benefit the airline. A member of GOL's board of directors entered into fraudulent contracts with third-party vendors connected to the implicated Brazilian officials to both fund and conceal these payments. For example, at the direction of a director, GOL paid US$1.14m to a company owned by a Brazilian official. The director falsely represented this as an investment to advertise on the company's website, knowing that the payments were for the benefit the Brazilian official that owned the company. According to the resolutions, as a result of insufficient internal accounting controls, GOL was able to falsify its books and record the transactions as legitimate business expenses. The payments, the DPA explains, were in actuality to secure the passage of payroll and fuel tax reductions that would financially benefit GOL and other airlines.

Cooperation and brand new DOJ policy

GOL cooperated thoroughly with DOJ, including conducting its own internal investigation whereby it reviewed extensive documentation, interviewed witnesses, conducted background checks and verified more than 2,000 transactions. Further, GOL disciplined the executive responsible for the scheme, who has resigned and had no further engagement with the company, and redesigned its entire anti-corruption program and developed other important remedial measures. GOL's exemplary cooperation was recognized to the full extent permitted by the US Sentencing Guidelines, resulting in a 25 percent reduction of the potential fine. The DOJ will also credit up to US$1.7m of that criminal penalty against an additional fine of US$3.4m that GOL owes to authorities in Brazil. Although the US law enforcement recognized GOL's ongoing cooperation in the matter, the resolution was ultimately guided by the commitment of the DOJ and the SEC to investigate and penalize egregious violations of the FCPA that evidence a lack of tenor from the top or adequate controls. Such is the case here whereby high-ranking members of the company knowingly caused millions of dollars in corrupt payments to be made to foreign officials and falsified company records to conceal those payments.

Almost simultaneously with the announcement of this settlement, Deputy Attorney General Lisa Monaco delivered a speech announcing new, more stringent DOJ policies on corporate crime enforcement. While GOL received full cooperation credit in its settlement, DAG Monaco warned that cooperating companies will not receive the same benefits if they drag their feet on self-disclosure, or fail to assist DOJ investigations by turning over key documents and information. DAG Monaco also noted that companies, like GOL, which now has a record of misconduct, will not receive favorable treatment for any future misconduct.

Latin America in the crosshairs

This resolution is evidence of the DOJ's continued focus on FCPA enforcement in Latin America, and demonstrates the ongoing cooperation of United States and foreign investigators which has been a center piece of DOJ's work in the region (see e.g. "A direct line from Central America to the US DOJ: The Anticorruption Task Force establishes a tip line for the Northern Triangle"). This settlement serves as a warning of the importance of robust and active compliance programs, including setting a tone from the top and strong accounting controls to deter and, if necessary, identify and mitigate corrupt conduct. This unusual case – company management trying to influence legislation—serves as a very real reminder that corruption risk can present itself in many different forms and at many different levels. Risk is not limited to a corporation's salesforce, it can infect the boardroom as well.

This settlement along with DAG Monaco's comments send a clear message: The government will utilize the full extent of its resources and leverage its cooperation with international law enforcement partners to weed out corruption and condemn companies that do not have a working compliance program. That program should thoroughly cover a corporation's conduct throughout its hierarchy and be robust enough to gain cooperation credit from the DOJ should the investigators come calling.