Civil Lawsuits to Combat Corruption The Third Conference on Evidence-Based Anti-Corruption Policies (CEBAP 3) 18 June 2015 Sukosol Hotel, Bangkok, Thailand Stephen Baker English Barrister & Jersey Advocate
Aug 15, 2015
Civil Lawsuits to Combat Corruption The Third Conference on Evidence-Based Anti-Corruption Policies (CEBAP 3)
18 June 2015Sukosol Hotel, Bangkok, Thailand
Stephen BakerEnglish Barrister & Jersey Advocate
Federal Republic of Brazil -v- Durant International
Corporation and Kildare Limited• Criminal Law
• S.A.R.• Production Orders• International Co-operation• Civil Law• Norwich Pharmacal• Witnesses• Injunction
Federal Republic of Brazil & Another v Durant International
Corporation & Another• Concerned major fraud and widespread
corruption in public office surrounding completion of public works contract “Avenida Agua Espraida” in Sao Paulo
• R$13.5 million diverted, via system of “cold invoices”, from municipal funds of which US$10.5 million was ultimately received in Jersey
The Fraud
“Chanani”“Chanani”
Doleiros Dollar Account
Doleiros Dollar Account
Durant International Corp.
Durant International Corp.
Kildare Finance Limited Kildare Finance Limited
EucatexEucatex
The Oryx Fund
The Oryx Fund
Latin America
Infrastructure Fund
Latin America
Infrastructure Fund
Mercosurian Challenge
Fund
Mercosurian Challenge
Fund
Latinvest Fund
Latinvest Fund
Brazilian Value Fund
Brazilian Value Fund
Foundland Investments
Fund
Foundland Investments
Fund
EMURBEMURB
Mendes JuniorMendes Junior
SubcontractorsSubcontractors
Paulo MalufPaulo Maluf
Venus/ Lespan/ Otalan/ Bigs/
Minister
Venus/ Lespan/ Otalan/ Bigs/
Minister
Brazil
New York
Jersey
BVI
The Main Players – Paulo Maluf
• Mayor of Sao Paulo from January 1993 – December 1996
• Engaged in organisation of and running of fraud
• Owner/ controlling mind of Jersey trust structure
The Main Players – Flavio Maluf
• Owner/ controlling mind of Jersey trust structure
• Director of Sun Diamond Limited (“Trustee Company”) and Durant International Corporation
• President of the “family company” Eucatex SA
• Responsible for transferring monies from Brazil into Jersey trust structure via black market dollar dealers
The Main Players – “Dolieros”
• Black market dollar dealers based in Sao Paulo
• Responsible for exchanging proceeds of fraud from Brazilian Reals (R$) to US Dollars for onward transmission to USA
• Payments disguised by a number of code named accounts
Criminal Investigations
• In Jersey, Channel Islands
• New York, USA and Brazil
• Into Maluf and his associates for offences of money laundering
• Handling the proceeds of corruption
11
Criminal Investigations
• Mutual Co-operation between Jersey and Brazil
• Jersey and USA
• Letter of Request
• Assets frozen
12
Criminal Investigations
• A series of challenges by Maluf against decisions to refuse to disclose Brazil’s letter of request for mutual assistance to Jersey
• Decision to transmit documents to Jersey
13
Results of criminal investigations
• USA Maluf and Falvio charged with money laundering
• Red Notices issued through Interpol
• In Brazil the case continues
• In Jersey relevant material sent to Brazil and USA
14
Civil Proceedings
• Brazil sues in Jersey
• It sues two BVI companies for knowing receipt of the proceeds of corruption
• It traces assets from Brazil through New York to Jersey
15
The Plaintiffs’ Claim
• The Plaintiffs claimed relief on the basis that:– The Municipality retained a proprietary interest
in the funds and as such:• The Defendants had knowingly received the
municipalities funds; and/ or• The Defendants had been unjustly enriched by the
municipalities funds
How the civil claim proceeded
• Disclosure Orders
• Norwich Pharmacal order against the Jersey bank which had information
• Freezing Orders against assets held in Jersey
• Trial
• Judgment in favour of Brazil with compound interest
17
01 Recibementos 24.12.97 R$ 8,337,335.31 26.12.97 R$ 208,433.38 30.12.97 R$ 12,542,198.43 02.01.98 R$ 600,115.71 09.01.98 R$ 11,481,085.02 16.01.98 R$ 10,136,000.00 23.01.98 R$ 7,528,081.16 02.02.98 R$ 6,459,162.19 Total R$ 57,292,411.20 02 Restituicoes de ISS R$ 208,433.38 R$ 322,380.00 R$ 283,441.10 Total R$ 814,254.48 03 Liquido Recebido Item 01-02 R$ 56,478,156.72 04 Total a pagar Divida Passada R$ 2,217,254.00 Divida Atual R$ 11,295,631.34 Total Geral R$ 13,512,885.34
05 Operacoes 08.01.98 R$ 2,000,000.00 R$ 1,200 = U$ 1,666,666.67 15.01.98 C 13.01.98 R$ 549,000.00 R$ 1,220 = U$ 450,000.00 20.01.98 C 13.01.98 R$ 465,314.10 R$ 1,220 = U$ 381,405.00 20.01.98 C 13.01.98 R$ 610,000.00 R$ 1,220 = U$ 500,000.00 20.01.98 C 14.01.98 R$ 1,595,100.00 R$ 1,227 = U$ 1,300,000.00 20.01.98 C 14.01.98 R$ 1,034,647.58 R$ 1,227 = U$ 843,233.56 21.01.98 C 15.01.98 R$ 1,011,120.89 R$ 1,227 = U$ 824,059.40 20.01.98 C 15.01.98 R$ 613,500.00 R$ 1,227 = U$ 500,000.00 21.01.98 C 15.01.98 R$ 592,300.10 R$ 1,227 = U$ 482,722.16 21.01.98 C 20.01.98 R$ 1,021,426.00 R$ 1,225 = U$ 833,817.14 21.01.98 C 20.01.98 R$ 504,115.68 R$ 1,225 = U$ 411,523.00 26.01.98 C 20.01.98 R$ 501,658.32 R$ 1,225 = U$ 409,517.00 22.01.98 C 28.01.98 R$ 1,505,616.23 R$ 1,190 = U$ 1,265,223.72 29.01.98 C 04.01.98 R$ 1,291,832.44 R$ 1,159 = U$ 1,114,609.53 08.02.98 C Total R$ 13,295,631.34 R$ 1,220 = U$ 10,982,777.18 28.01.98 R$ 217,254.00 R$ 1,245 = U$ 174,501.00 28.01.98 P Total Geral R$ 13,512,885.34 = U$ 11,157,278.18
Posicao em 05.02.98
A New Asset Recovery Paradigm
• Effective Asset Recovery operations require the use of a top quality private sector asset recovery team under the direction of the victim government and its counsel
• Take a broader view of what an “asset” is
19
Initial Considerations
• Cost effectiveness is key
• Members of the team:– Lead counsel & local counsel– Investigator– Forensic Expert
20
Pertinent Questions
• How can the investigation proceed to the next level?
• What are the considerations for hiring private counsel, investigators and forensic counsel.
• Does the victim government possess the necessary investigative tools?
• Should the victim government employ an asset recovery team?
21
Pertinent Questions II
• How can misappropriated, and possibly secreted, assets be located and recovered?
• What is the relationship between the civil and criminal arenas in these types of cases?
• What political considerations are there?
22
Other Considerations
• Privilege/ confidentiality issues
• Publicity and Pubic Relations
• Multi-jurisdictional coordination
• Coordination between criminal and civil matters
• MLAT and evidence gathering issues
24
Funding for Asset Recovery
• Principal barrier is obtaining up front funding to initiate civil actions to preserve and recover the assets and bring claims
• Defining “assets” broadly
• Low-hanging fruit
• Look for creative funding options
25
Thinking Outside the Box• The search for assets can, at first, appear to be a
daunting task
• Victim governments must often become involved in civil, criminal and other proceedings in multiple jurisdictions
• Victim governments often limit themselves to thinking in terms of criminal prosecutions and government-to-government asset recovery avenues
• Consider non-traditional assets and legal strategies
• Victim governments must work with experienced lead counsel to formulate an asset recovery plan
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Stephen BakerEnglish Barrister & Jersey Advocate
Tel: +44 (0) 1534 766254Fax: +44 (0) 1534 737355
Email: [email protected]