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

1. 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

2. Civil Recovery –
Case Study

3. Paulo Maluf
Trial July 2012

4. 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

5. 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

6. The Fraud
“Chanani”“Chanani”
Doleiros Dollar
Account
Doleiros Dollar
Account
Durant International
Corp.
Durant International
Corp.
Kildare Finance LimitedKildare 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

7. 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

8. 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

9. 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

10. Foreign Exchange via Dolieros
R$
Doleiros Reais Bank
Account
Doleiros Dollar Bank
Account
US$

11. 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

12. Criminal Investigations
• Mutual Co-operation between Jersey and
Brazil
• Jersey and USA
• Letter of Request
• Assets frozen
12

13. 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

14. 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

15. 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

16. 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

17. 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

18. 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

19. 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

20. Initial Considerations
• Cost effectiveness is key
• Members of the team:
–Lead counsel & local counsel
–Investigator
–Forensic Expert
20

21. 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

22. 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

23. What are your options?
23

24. Other Considerations
• Privilege/ confidentiality issues
• Publicity and Pubic Relations
• Multi-jurisdictional coordination
• Coordination between criminal and civil
matters
• MLAT and evidence gathering issues
24

25. 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

26. 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
26

27. Stephen Baker
English Barrister & Jersey Advocate
Tel: +44 (0) 1534 766254
Fax: +44 (0) 1534 737355
Email: email@bakerandpartners.com
www.bakerandpartners.com