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A. Gutierrez Engenharia reaches settlement agreement with IDB Group resulting in sanctions

The company is declared ineligible for an agreed period to participate in IDB Group-financed projects for its past involvement in corrupt practices

Following an investigation by the Office of Institutional Integrity (OII, an independent office of the Inter-American Development Bank) with the full cooperation of the Brazilian company Andrade Gutierrez Engenharia S.A. (“AG Engenharia”), the IDB Group announced today the debarment of AG Engenharia for 3 years and 1 month in connection with prohibited practices committed in IDB-financed projects in Brazil. With credit for a period of voluntary restraint, the debarment period remaining totals 2 years and 6 months. 

The sanctions are the result of a Negotiated Resolution Agreement (the “Settlement”) between the IDB, the Inter-American Investment Corporation (IDB Invest) and AG Engenharia. The Settlement relates to allegations of corrupt practices in connection with four contracts financed by the IDB under the Estrada Nova Watershed Sanitation Program (“PROMABEN”) and the Igarapes de Manaus Environmental and Social Programs II, Supplemental and III (collectively “PROSAMIM”) in Brazil.

According to admissions made by AG Engenharia, the company agreed to make illicit payments to government officials in exchange for the award of contracts. Specific to PROSAMIM, between 2009 and 2012, AG Engenharia agreed to pay government officials between 5-10% of each contract amount and a one-off payment equivalent to approximately US$11.8 million. Based on the values of the underlying contracts, the corrupt payments were potentially as high as US$47 million.

In the case of PROMABEN, between 2011 and 2012, AG Engenharia agreed to pay government officials 7% of any contract payment as a kickback. Based on the values of the underlying contracts, the corrupt payments were potentially as high as US$1.9 million.

At an early stage in the investigation, AG Engenharia made a full disclosure of wrongdoing, fully cooperated with OII, provided investigators with unhindered access to requested information, including remedial measures taken by the company, and voluntarily restrained from bidding in IDB Group-financed activities during the investigation. This substantial cooperation is reflected in a significantly reduced sanction. Separately, in 2018, AG Engenharia reached a settlement on these same (and other) matters with Brazilian authorities in which AG Engenharia agreed to pay more than $381 million in fines.

In addition to the sanctions against AG Engenharia, 11 subsidiaries will be subject to debarment for the same time period.

Under the terms of the Settlement, AG Engenharia commits to report on its compliance program through an existing independent monitor and continued cooperation with OII, including internal investigations that are intended to uncover systemic integrity risks to IDB Group-financed activities. In the event AG Engenharia fails to fulfill its obligations, the sanction will continue until the conditions are met, or until 9 years from the effective date, whichever occurs earlier.

The Settlement was negotiated by OII in accordance with the IDB Group's Sanctions Procedures. Settlements of this nature are used by the IDB Group and other multilateral development banks as an effective means to resolve investigations related to prohibited practices in exchange for cooperation and disclosures of systemic integrity risks.

The debarment of AG Engenharia and listed subsidiaries qualifies for cross-debarment by other multilateral development banks (MDBs) under the Agreement for Mutual Enforcement of Debarment Decisions that was signed on April 9, 2010.

About the IDB Group

The IDB Group is the leading source of development finance for Latin America and the Caribbean. It helps to improve lives by providing financial solutions and development know-how to public and private sector clients. The group comprises the IDB, which has worked with governments for 60 years; IDB Invest, which serves the private sector and IDB Lab, which tests innovative ways to enable more inclusive growth.

 

Contacts

Turner, Taos Lee

Turner, Taos Lee
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