In September, the Ministry of Transparency and Comptroller-General of the Union (MTCGU) published the Practical Handbook for the Evaluation of Integrity Programs in the Administrative Accountability Procedure of Legal Entities (PAR). The document seeks to provide guidance and assurance for public servants with the Federal Executive Branch responsible for conducting the PAR, instituted by Law No. 12,846/2013 (the Anti-Corruption Law), especially members of the Administrative Accountability Procedure Committee (CPAR).
While the manual is intended for members of the Federal Executive Branch, its user-friendly format and easy-to-use language helps the market to more clearly understand how authorities intend to evaluate integrity programs promoted by the Anti-Corruption Law in the context of the PAR.
The publication also tends to be freely used by authorities of other powers that may be responsible for conducting accountability procedures, which might bring greater security to this work and to the authority itself. The text does not have the status of law and should be considered a guiding document, just as the document "Integrity Program - Guidelines for Private Companies", also released by the MTCGU in 2015 (at the time, known as CGU).
The manual reinforces the idea that integrity programs aim, mainly, at preventing, detecting, and remedying irregularities and that, although potentially reducing the fine applicable to legal entities that commit unlawful acts, they do not exempt them from liability. Hence, the existence of an integrity program has no bearing on the analysis of the legal entity's liability. An evaluation of the program will be carried out, therefore, if it is deemed useful to determine the amount of the fine to be proposed.
Thus, the CPAR will evaluate a legal entity’s integrity program only when three situations simultaneously apply to the specific case: (a) if the PAR concludes that a fine will in fact be applied to the legal entity; (b) if the calculation parameters of the fine (articles 17 and 18 of Decree No. 8,420/2015) lead to an amount above zero on the percentage applicable to the gross revenue of the legal entity subject to the fine; and (c) if the benefit accrued by the irregularity committed by the legal entity is equivalent to less than 20% of its gross annual revenue.
Item (a) arises, for example, from the possibility that the legal entity may be considered innocent of the allegations made, a situation in which a fine would not be applied and therefore an evaluation of the integrity program would not be necessary.
Item (b) relates to the fact that it is impossible for a legal entity found guilty in the PAR to be exempt from a fine – therefore, it does not make sense to evaluate the integrity program in order to reduce the fine if it is already the minimum amount – which is 0.1% of gross annual revenue (even if the calculation results in an amount equal to or less than 0).
Item (c) is due to the fact that the fine will never be less than the advantage received by the legal entity when the illegal act was committed. Thus, if the advantage obtained in committing the irregularity is more than 20% of gross revenue (the maximum percentage of the fine), the fine will be equal to the value of the advantage (and reduction of the fine will not be applicable). With this provision, the legislation seeks to ensure that commission of an offense is never beneficial to the legal entity.
In any case, the information regarding the integrity program must be demonstrated together with the first written defense presented by the legal entity participating in the PAR, even if the program is not evaluated at that moment and might, depending on the specific case, not ever be evaluated. This demonstration should be carried out according to the profile report and compliance reporting models (available in the manual and stipulated by the ordinance CGU No. 909/2015).
Claiming that Article 42 of Decree No. 8,420/2015 presents vague parameters for evaluating integrity programs (which is also our view), the manual creates a methodology for evaluating programs, to be applied by means of a spreadsheet (which can be accessed at link).
As stipulated in this worksheet, therefore, the evaluation will be divided into three blocks:
- Organizational culture of integrity (COI);
- Integrity mechanisms, policies, and procedure (MPI); and
- Actions by the legal entity in relation to the injurious act (APJ)
The calculation will be done as follows: [(COI x MPI) + APJ] = percentage by which the fine is reduced. We describe below what each block refers to:
- COI, whose value varies from 0 to 1.8: it identifies the company's culture regarding integrity issues, engagement of professionals, etc.
- MPI, whose value varies from 0 to 1.5: evaluates the instruments used to prevent, detect, and remedy irregularities (policies, procedures, controls, processes, etc.).
- APJ, whose value varies from -0.6 to 1.3 (for programs existing before the injurious act) or to 0.3 (for programs established after the harmful act): aims to verify the role of the integrity program in the prevention, detection, and remediation of the irregularity that is the subject of the PAR, as well as what the reaction of the legal entity was with respect to the occurrence of this specific irregularity, that is, what measures were taken internally to remedy the specific case and to ensure that the situation does not occur again.
The values of each of the blocks will be automatically calculated by the worksheet based on the answers provided by the CPAR, that is: 0 will be "no", 1 will be "partially”, and 2 will be "yes".
The manual reinforces the need for a careful evaluation so that only legal entities whose integrity programs have effective capacity to prevent, detect, and remedy harmful acts to the public administration will bring about benefits, since the primary objective of these programs is to avoid irregularities.
In conclusion, these more objective parameters provided by the manual give greater legal certainty in the evaluation of the integrity programs in the context of the PAR, in addition to guiding more clearly the very preparation and structuring of the programs themselves, which contributes to the prevention of unlawful practices, since it helps legal entities to have have internal tools that are indeed effective in combating the problem.