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IDB Announces Settlement with Copasa do Brasil Regarding Prohibited Practices

The IDB has announced the debarment of the Brazilian Sociedad Anónima de Obras y Servicios Copasa do Brasil (Copasa do Brasil) for 18 months in connection with allegations of corrupt and fraudulent practices. The prohibited practices were committed by a consortium to which Copasa do Brasil was a non-leading party in the context of a roads construction contract under the Mario Covas Rodoanel Project - Northern Section. The debarment makes Copasa do Brasil ineligible to participate in projects and operations financed by the IDB Group and follows an investigation by the Office of Institutional Integrity (OII), with the company’s full cooperation.

According to OII’s findings, in 2013-2015 the other entity partner, on behalf of the consortium, made illicit payments totaling approximately US$1 million to a public official involved in the supervision and management of the contract. The public official demanded payments through a designated subcontractor. A consortium manager affiliated with the other partner of the consortium authorized said payments based on the impression that a failure to pay would result in unjustified delays in approvals for contract-related disbursements due during the execution of works. Additionally, to conceal the illicit payments, the consortium also misrepresented certain project expenses and activities.

Prior to the illicit payments being made, a manager of Copasa do Brasil was aware of the public official’s bribe solicitations and the requested use of a subcontractor. He refused to pay, but failed to report it, believing that payments would not be made. Several years later, the manager was informed that, in fact, bribes were paid by the other consortium partner using the designated subcontractors hired by the consortium.

The sanction is the result of a Negotiated Resolution Agreement (the Settlement) between the IDB and Copasa do Brasil in accordance with the IDB Group’s Sanctions Procedures. As part of the Settlement, the company did not contest its responsibility for the prohibited practices committed by the consortium, including OII’s finding that a company´s senior manager failed to act to prevent those prohibited practices from occurring.

In response to a national investigation, Copasa do Brasil reached an agreement with the Brazilian authorities, including the restitution of funds and payment of fines. These facts, along with the company’s full cooperation with OII, was reflected in a significantly reduced sanction.

Under the terms of the Settlement, Copasa do Brasil commits to report on its compliance programs through an independent compliance consultant and to continue its cooperation with OII. In the event that the company fails to fulfill its obligations, the respective sanction will continue until the conditions are met, or until six years from the effective date of the Settlement, whichever occurs earlier.

The debarment of Copasa do Brasil 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 more than 60 years; IDB Invest, which serves the private sector; and IDB Lab, which tests innovative ways to enable more inclusive growth.

The Office of Institutional Integrity (OII) has a central role in the IDB Group’s commitment to integrity through its mandate to conduct investigations of Prohibited Practices and provide prevention support to operational units.

Contacts

Manzano Guillen, Maria De Gador

Manzano Guillen, Maria De Gador
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