Considered as a “real death penalty”, the Supreme Court decided that it was illegal for The Federal Audit Court (“TCU”) to impose a sanction of disreputability against companies that signed leniency agreements

The leniency agreement executed in connection to bid-rigging infractions is provided for in the Anti-Corruption Law (Law 12.846/2013) and aims at establishing an agreement with officers of companies who have committed harmful acts. Granting benefits to private individuals that, through the administrative process itself, present new and sufficient evidence for the condemnation of the others involved in the alleged violation, expedite the measures to recover the damages caused to the treasury by the organizations.

Consequently, upon celebrating the leniency agreement, the agent is entitled to  the following benefits: extinction of the punitive action carried out by the public administration, or reduction of the penalty imposed.

Last March 30th, a decision rendered by the Second Panel of the Supreme Court provided legal certainty for leniency agreements, maintaining the sanctions imposed by the Federal Audit Court and, consequently, putting at risk the agreements signed between private entities and the Public Administration.

The decision that determined that it was illegal for TCU to impose a sanction of disreputability against companies that signed leniency agreements with other institutions on the same facts analyzed by the TCU was made in a trial based on four writ of mandamus, which were brought by the contractors Andrade Gutierrez Engenharia S.A., Construtora Artec S.A., UTC Engenharia S.A. and Construtora Queiroz Galvão S.A., all investigated in Operation Lava Jato, against acts of the TCU that prevented their contracting with the Public Administration due to processes for fraud in the bids for the services rendered in connection to the Nuclear Power Plant Angra 3.

The defense lawyers sustained that the sanction could not be applied as long as the leniency agreements lasted and, with the suspension of the penalty, the participation of the companies in bids was once again authorized.

Justice Gilmar Mendes pointed out in his vote that TCU’s interference could make the conclusion of future leniency agreements unfeasible and classified the imposition of the sanction of disreputability against companies as a “real death penalty”, since it would prevent the construction companies from repairing the damage to the treasury.

The Justice also alleged the incompatibility with the principles of efficiency and legal security when applying the sanction for the same facts that gave rise to the signing of leniency agreement with the General Attorney of the Government and the General Comptroller’s Office, and, therefore, it is essential to carry out a joint interpretation, between the various control entities, in order to guarantee to employees the predictability of sanctions and premium benefits.