Braskem S.A.: Commissions for Export Work Nobody Did

In the Braskem S.A. FCPA case, the company agreed to give up $325 million in profits to settle civil allegations under the Foreign Corrupt Practices Act that it concealed Brazilian bribes as export commissions. For someone in sales, purchasing or finance, the revealing question is what those commissions supposedly bought. The Securities and Exchange Commission alleged that no export services were needed and no valid agency agreements existed.

Braskem produced petrochemical and thermoplastic products from its headquarters in São Paulo, Brazil. Its American Depositary Receipts traded on the New York Stock Exchange, and its financial reports went to the Securities and Exchange Commission. Odebrecht controlled the company, while Petrobras, Brazil’s state-controlled petroleum company, was both a shareholder and a raw-material supplier. The alleged bribes reached decisions about a plant, supply prices and tax credits, all central to what Braskem’s business cost to run.

A Shared Payment System Behind the Commissions

In its corporate guilty plea, as described in the Justice Department’s December 21, 2016 announcement, Braskem admitted paying approximately $250 million into Odebrecht’s secret payment system between 2006 and 2014. It authorized bribes to Brazilian politicians, political parties and a Petrobras official. The admitted benefits included preferential raw-material prices, Petrobras contracts and measures reducing Braskem’s tax liabilities.

Odebrecht’s admissions in its own guilty plea, described in that same announcement, explain the machinery Braskem used. Its Division of Structured Operations maintained separate communications and accounting systems, with codenames, passwords and spreadsheets tracking a hidden budget. Offshore entities moved money onward by wire or cash. This parallel payment system kept the intended recipients and purposes away from the ordinary books.

The Securities and Exchange Commission’s complaint against Braskem traced the money entering that system through three shell companies posing as export consultants. It alleged that Braskem and its Cayman Islands subsidiary paid the companies using fabricated commissions, and the companies moved the money into Odebrecht’s off-book accounts. The complaint alleged that at least $75 million of the money put into the network funded bribes that directly benefited Braskem.

According to the complaint, the invoices referred to export agency agreements and commissions on exports to customers. The complaint’s description of the work behind them was blunt:

We see a business expense with the business missing. Someone who knew the export customers or the services actually purchased could recognize a contradiction that the commission label concealed.

What the Payments Bought in Brazil

The Securities and Exchange Commission alleged that Braskem bought influence over commercial decisions at Petrobras and tax decisions in Brazil’s legislature. Following those decisions gives a purchasing or plant employee a different view of the scheme from the one in accounts payable. A lower input price or a preserved partnership could be the business result of a payment recorded elsewhere as an export commission.

Keeping Petrobras in a Plant Agreement

According to the SEC complaint, Braskem and Petrobras agreed around 2005 to build a polypropylene plant in Paulínia, São Paulo. Braskem executives feared Petrobras would terminate the joint venture under public pressure. They met with Petrobras’s chief downstream officer and a Brazilian congressman, who allegedly demanded approximately $4.3 million to prevent that withdrawal.

The SEC alleged that Braskem paid through Odebrecht’s off-book accounts and received a direct financial benefit valued at approximately $8.4 million from keeping the agreement. The complaint alleged that the payments appeared in Braskem’s books as Commissions Payable and reached its financial statements as legitimate business costs. Here, the supposed export expense bought influence over a plant partnership. The people familiar with the joint venture had a piece of the explanation that the accounting entry left out.

A Cheaper Naphtha Pricing Formula

Naphtha was a raw material for Braskem’s petrochemical production, and the complaint described Petrobras as its only Brazilian supplier. At the time described, Braskem bought approximately 70% of its naphtha requirements from Petrobras. A change in that supply price therefore reached a substantial part of the manufacturer’s input costs.

The Securities and Exchange Commission alleged that a senior Braskem executive agreed to pay the Petrobras official and congressman approximately $20 million over time. In return, they used their influence over contract approval to secure a pricing formula that lowered Braskem’s naphtha cost. The complaint put the resulting savings at approximately $94 million from March 2009 through February 2014.

According to the complaint, the Petrobras official acted as lead negotiator and influenced both the technical team and executive board. An intermediary exchanged bank instructions and wire confirmations with a Braskem executive.

That account connects the technical negotiation to the money moving outside it. We would want to understand what changed in the pricing formula, who could secure approval and how the payment instructions related to that decision. For an insider, knowledge of the supply negotiation can explain why the commission existed at all.

Tax Credits Reached the Raw-Material Bill

The complaint also alleged payments for legislation benefiting Braskem’s raw-material purchases. It described a tax credit for naphtha and a later expansion to other inputs used in the petrochemical industry. The complaint put the expenses and costs Braskem avoided through tax credits and other legislative measures at approximately $187 million.

According to the complaint, senior executives arranged payments to senators and representatives for their influence over the credits. A Braskem director also instructed that money be routed through Odebrecht’s accounts to political party officials to help obtain the expanded benefit. Those payments, the complaint alleged, again became Commissions Payable in the financial statements. The alleged disguise was an export service. The benefit appeared in the manufacturer’s tax bill.

The Books Told a Different Story

The Securities and Exchange Commission alleged that Braskem recorded payments to two of the shell companies in at least 926 general ledger entries as Commissions Payable. Its Cayman Islands subsidiary recorded its own payments under the same heading, sometimes moving U.S. dollars through financial institutions in the United States. The complaint alleged that the subsidiary’s accounts then flowed into Braskem’s financial statements filed with the commission.

That is the books and records problem in concrete terms: an invented service became a reported business cost. The commission entry supplied an ordinary explanation for money that the complaint alleged was intended for officials. A finance employee who knew the contract was missing, or a sales employee who knew the named customer needed no agent, could connect the entry to what actually happened in the business.

The alleged control failure was equally specific. Employees could manually add commission payments without anyone verifying that a contract existed, and the complaint described what happened next:

The complaint further alleged that payments lacked an identified legitimate sale or customer connected to the commission. It described an ethics committee and a reporting line, but a code of conduct that neither prohibited improper payments to foreign officials or political parties nor mentioned the Foreign Corrupt Practices Act. We see the distance between having a place to raise a concern and requiring an answer before money leaves.

Petrobras’s own accounting case shows a related disguise in a different account. In its September 2018 order, the Securities and Exchange Commission found that contractors overcharged Petrobras to fund kickbacks and that Petrobras recorded the full contractor payments as spending to acquire and improve assets. The commission’s complaint against Braskem describes false commission expenses, while the Petrobras order describes inflated asset costs. In both, knowing what the transaction really bought explains what the financial statements concealed.

The Civil Settlement and the Former CEO’s Plea

The Securities and Exchange Commission’s December 2016 announcement called Braskem’s civil payment disgorgement, the surrender of profits from the alleged conduct. Its stated allocation was $65 million to the SEC and $260 million to Brazilian authorities.

The Justice Department’s announcement identified the FBI’s New York Field Office as the investigator in the corporate criminal case. The Securities and Exchange Commission’s own announcement identified its FCPA Unit as conducting the civil investigation.

The former CEO’s later criminal case carried the false-accounting story into the certification of Braskem’s financial reports. According to the Justice Department’s account of that proceeding, he pleaded guilty on April 15, 2021 to conspiracies involving anti-bribery violations, false books and records, and failure to certify those reports accurately. The release described fraudulent contracts and offshore shell companies as the means of generating the secret fund. It identified the FBI’s International Corruption squad in New York as the investigator in his case. For someone involved in financial reporting, that connects the commission entry with the assurance management gave about the accounts.

What an Insider Sees in an FCPA Bribery Scheme

A petrochemical payment trail runs through more than the bank account. The plant agreement shows the partnership the company wanted to preserve. The supply contract and pricing formula show the input cost it wanted to reduce. Tax records show the benefit from legislative changes, while invoices, approvals and ledger entries show how the money was described. We connect that evidence of the decision and payment with what you know about the people making those decisions.

The March 2019 working paper Do Corporate Whistleblower Laws Deter Accounting Fraud?, hosted by MIT Sloan, studied companies exposed to state whistleblower laws through pension-fund investment. It found a lower estimated likelihood of accounting fraud after that exposure, with little evidence that increased internal auditing investment explained the change. We see support here for the value of insider knowledge alongside formal controls.

The SEC whistleblower reward program can reward original information that leads to a successful enforcement action. A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. We assess which of these separate programs fits what you saw.

You Know What the Commission Really Bought

If you know the customer, the supply negotiation or the reason a payment went through, talk with our whistleblower experts about the transaction. We develop the case with you and bring in FCPA whistleblower lawyers who understand offshore payments, public-company accounting and state-controlled counterparties. We stay beside you as the knowledge from your part of the business becomes your strongest FCPA whistleblower case.