Opinion, by Michael Royster

RIO DE JANEIRO, BRAZIL – Under long-standing Brazilian administrative law, all companies whose executives have been convicted of corruption of government officials must be declared “inidôneo” (literally “disreputable”) and excluded from performing or bidding on government contracts.

The Curmudgeon, aka Michael Royster.
The Curmudgeon, aka Michael Royster.

President Dilma has publicly advocated NOT applying the bidding and contract exclusion to the companies involved in the “Petrolão” scandal; in her view, only individual officers and directors should be punished.

How does a President, whose job is to enforce the law, justify asking prosecutors and courts to ignore a well-known anti-corruption provision?

The reason is quite simple: it’s the “too big to fail” rule. The companies being discredited are all members of Brazil’s most powerful and pervasive oligopoly, the heavy construction industry responsible for most of Brazil’s major public works. They’re “too big to shut down.”

Dilma loves major public works because they generate high employment, currently the only bright spot in the Brazilian economy. If the miscreant companies are shut down, she argues, thousands of workers will lose their jobs, and workers shouldn’t be punished for the sins of their bosses.

Dilma says companies caught corrupting should be sentenced to pay a fine and then allowed to continue working as if they were “reputable” businesses — which, of course, they have never been.

That’s impunity.

There’s worse. Dilma has publicly advocated not even applying the draconic fine in the Anti-Corruption Act – Twenty percent of the annual turnover of the company — for, she claims, the same reason: the fine would cripple the companies, causing them to shrink, and fire workers.

The unspoken (but very real) fear of impunity’s defenders is that shrinking companies would make attractive targets for acquisition by companies headquartered abroad, long excluded from Brazil by the local oligopoly.

Foreign ownership of heavy construction is anathema to most Brazilian politicians, because the local behemoths have been financing (legally and illegally) election campaigns for decades. Foreign companies are unlikely to do that, out of fear of the FCPA and similar anti-corrupton legislation which is rigorously enforced abroad.

How different from Brazil, whose President advocates not enforcing the laws on corruption.

The Curmudgeon plans to emit more short(ish) Smidgens opportunely. Stay tuned.



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