Anti-Corruption Law requires coherent regulation among the federative entities

Translated from the original.

By Tadeu Rover

The lack of federal regulation and the possibility that each municipality and state may regulate the Anti-Corruption Law in its own way has caused expectation in both the public and private sectors. This is the reality that lawyer Fábio Medina Osório has encountered in his lectures around the country on the new law, which turned one year old this week. “It is no use for each entity to have a completely disparate regulation on a normative system that should have some kind of rationality”, he says.

Married to a federal treasury attorney (procuradora da Fazenda Nacional) and father of two children, Medina Osório made a career in the Public Prosecution Service, which he left to practice law. At 24, he took office as a public prosecutor in Rio Grande do Sul, where he worked on combating administrative improbity. After 15 years in the Public Prosecution Service, he resigned and went to work in the private sector as legal director of a company. He then opened his own firm — Medina Osório Advogados.

The years spent in the Public Prosecution Service made the lawyer a critic of the institution. According to him, there is a schizophrenia in the MP whereby each prosecutor acts on his own convictions, lacking institutional unity and creating legal uncertainty. Medina Osório also criticizes the role of the procurador de Justiça (appellate prosecutor). “Those who work at the second instance are practically luxury advisors to judges and only issue opinions,” he says.

The academic background of Fábio Medina Osório includes a master’s degree at the Federal University of Rio Grande do Sul and a doctorate in Administrative Law at the Complutense University of Madrid, under the supervision of Professor Eduardo García de Enterría, one of Spain’s greatest authorities in Public Law, who died in 2013.

Author of several works on Administrative Law, the lawyer today presides over the International Institute for the Study of State Law (IIEDE), founded jointly with the full professors of the Complutense of Madrid in 2003. The IIEDE functions as an international exchange of experiences. According to Medina, the institute is characterized by its focus on seminars and on critical reflection on the role of the State in relation to the regulatory agenda.

Read the interview:

ConJur — You have been giving lectures on the Anti-Corruption Law. What has been the greatest difficulty encountered by the public authorities?

Fábio Medina — The gap in the regulation. This point has generated expectation in both the public and private sectors. There is fear regarding the possibility of abuse of power, misuse of purpose and political instrumentalization of the oversight bodies. No one knows what kind of administrative structure will apply this law, and the administrative sanctions are very heavy.

ConJur — What should this structure look like?

Fábio Medina — Brazil should move toward an institutional framework of regulatory agencies to enforce this law. I think that the Office of the Comptroller General of Brazil (CGU), at the federal level, should become a large regulatory agency, with fixed terms and with autonomy. This structure should be replicated in the states. These agencies would be run by people appointed according to technical criteria. Technical protagonism and impersonality are important in applying a regulation that will demand a great deal of prudence.

ConJur — And how can uniform application be ensured throughout the country, given that regulation may be done by each municipality?

Fábio Medina — A dialogue among all the entities will be needed, to guarantee legal certainty. It is no use for each entity to have a completely disparate regulation on a normative system that should have some kind of rationality. If each entity can regulate in whatever way it sees fit, in total dissonance also with whatever may be dictated at the federal level, we will have absurd legal uncertainty.

ConJur — What is expected of the Union's regulatory decree?

Fábio Medina — First, it should have been discussed more, with public hearings. Then, for it to be a good decree, it must detail the infractions and procedures and work, basically, on this concept of the regulatory agency. The regulations made so far basically repeated the law, which is wrong. The regulation has to go further.

ConJur — How do you analyze the Administrative Improbity Law (Law 8,429/1992) in its 22 years in force?

Fábio Medina — The Improbity Law, I call it the Law of Corporate Probity, drawing an equivalence with administrative probity. In the case of corporate probity, you imagine that it is now the economic agents, the private legal entities, that must observe public duties, or duties, let us say, governed by administrative law.

ConJur — Isn't that a reversal? Shouldn't it be the State's role?

Fábio Medina — No. It is the State’s leading role that is being conferred. This is an influence of Anglo-Saxon law. Public spaces are increasingly occupied by non-state bodies, even by the private sector. You see in the criminal system that institutes such as plea cooperation are closing the net around the private sector. They show that the private sector has duties.

ConJur — Incidentally, the Anti-Corruption Law placed among the duties of companies the creation of a compliance sector .

Fábio Medina — Exactly. Since it is prohibited from committing crimes against the public administration, against the financial system and so on, it also has to investigate those crimes that are occurring inside the company, so there has to be a system of private investigation of crimes.

ConJur — And are companies absorbing this well?

Fábio Medina — In general, this is a new culture in Brazil. Even in the most regulated markets, such as the financial market, there was never a compliance focused specifically on anti-corruption. It was much more a compliance of ethical standards, of protection of institutional integrity. Now it is different: companies will have to monitor their employees. If an employee commits an act of corruption that is, in theory, in the company's interest, the company can be held strictly liable for it. In order to sever the causal link between the conduct and the offense, it has to show that it adopted all the compliance practices. And it is necessary to show consistency in these mechanisms, to show the autonomy of the compliance officer.

ConJur — What do you mean?

Fábio Medina — There is no point in appointing a compliance officer who is an employee of the company and has no guarantees. The same concept of an independent administrative authority should also be applied to the compliance officer, who should preferably be an independent law firm. A long-term contract is needed, with clauses that allow intellectual autonomy and independence of action.

ConJur — Should the Administrative Improbity Law be revised?

Fábio Medina — To understand any rule, there is a first phase, which is the legislator’s proposition, and a second phase, which is that of jurisprudentialism. It is in this phase that the effective normativity is defined, what the concrete content of the law is. In this case, the Improbity Law managed to acquire quite dense content, from case law. For that reason, it is not always very healthy to keep changing the law all the time. The law must be allowed to mature in its own time, with case law, in order to create legal certainty.

ConJur — Even so, does the Improbity Law still generate a great deal of discussion?

Fábio Medina — It generates debate, but the STJ has settled some interesting points. For example, by stating that not every illegality is the same as improbity. That is an important point.

ConJur — How to draw the distinction?

Fábio Medina — You have to assess this according to the parameters the Superior Court of Justice (STJ) has laid down, with regard to the subjective element of the conduct, the seriousness of the violation, the evidence gathered, the individualization of the prohibited behavior. For example, when there is a legally tolerable margin of error, it cannot be considered improbity. When there is a controversy over whether or not a bidding process is required, there is no improbity, because when there is a controversy you have a legally tolerable margin of error.

ConJur — Despite this case law, one still sees many improbity actions brought by the Public Prosecution Service, mainly challenging waivers of public tenders.

Fábio Medina — This is the big issue today. If the Public Prosecution Service disagrees with the opinion of the public manager, who declared a case of non-requirement of bidding or a waiver, the MP exercises legality review through the improbity action. But this varies depending on the unit of the Public Prosecution Service. That, by the way, is a problem of the MP.

ConJur — Independence of action?

Fábio Medina — The Public Prosecution Service needs to strengthen the principle of institutional unity of action, which should be done by the National Council of the Public Prosecution Service. The Public Prosecution Service has two great principles in the Constitution that are vectors of its action: the principle of functional independence and the principle of institutional unity. In my view, the first principle crushed the second. Each prosecutor's office is an autonomous head, without hierarchical controls. There is a certain schizophrenia within the institution that also harms the citizen, because this business of everyone having his own understanding ends up creating an absurd agenda of legal uncertainty. As a result, people who are subjected to arbitrary improbity actions should bring indemnification actions against the authors of those actions.

ConJur — Doesn't this normally happen?

Fábio Medina — It is not common, but it should be. If you suffered an arbitrary action by the State, you should seek civil liability of the public official so that he answers personally with compensation for the arbitrary act.

ConJur — Is intent necessary to characterize improbity?

Fábio Medina — Not necessarily. There may be gross negligence, gross error. However, it must be noted that there is a difference between gross error and legitimate error. The administrator has the right to err, like everyone else. The judge has the right to err. He decides a case, his judgment is reversed on appeal, which means he erred. But that does not mean he should be held liable for that error.

ConJur — Are there many cases in which lawsuits end up costing more than the frauds themselves?

Fábio Medina — Yes. There should be an economic rationality about this, as happens in criminal actions. A parameter was created for the principle of insignificance. Or, at least, a Conduct Adjustment Agreement could be provided for, which in my view is applicable in these actions, provided that the typicality of improbity is ruled out. If the investigation begins with an unlawful act against public assets, but the amount is small, then a conduct adjustment agreement is made. If an offense against the public treasury or another kind of unlawful act is established, then restoration via agreement would be appropriate. If the harm does not reach a minimum threshold, the Public Prosecution Service should propose an agreement and restore the treasury.

ConJur — According to the Anuário da Justiça, 13% of the 517 direct unconstitutionality actions (ADIs) decided by the São Paulo Court of Justice in 2014 concern laws creating posts in the municipal civil service. And most of them concern the unlawful creation of commissioned posts. Can this be considered improbity?

Fábio Medina — There is a great controversy. In my understanding, for this to be considered improbity, intent is required. For example, if the public administrator created the positions in order to place political allies or to serve private interests.

ConJur — We not infrequently see actions by the Public Prosecution Service annulled for errors considered simple. Has the MP failed in its investigations?

Fábio Medina — The Public Prosecution Service can do much better work if it investigates well. What we have often observed is people trying to push an improbity action forward on the strength of the objective nature of the fact. They do not investigate and even ask for summary judgment, without any production of evidence, because producing evidence is a lot of work. And this should not be produced in the Judiciary. The civil inquiry in the Public Prosecution Service exists precisely to investigate. The rationality of the punitive system requires that institutions exercise their prerogatives and duties to the fullest.

ConJur — Is that a current characteristic of the Public Prosecution Service? When you were a prosecutor, was that already happening?

Fábio Medina — This is a problem with public competitive exams in general. People must have a style, a career meritocracy, to encourage qualified work. What one sees today is the following: whether you work a lot or you work little, the salary is the same. And investigating well, building a robust case, takes extraordinary work.

ConJur — You are also a critic of the Public Prosecution Service's performance at the appellate level.

Fábio Medina — Those who work at the second instance are practically luxury advisors to judges. They only give opinions. All that workforce could be at the first instance, on the front line of the Public Prosecution Service. Instead, they are sitting in the courts giving opinions to the Justices, to the appellate judges, often in opposition to the position of their first-instance colleagues.

ConJur — Should this role be abolished?

Fábio Medina — Yes. Imagine the now-retired Lenio Streck, for example. He is a great mind, with accumulated knowledge and experience that could help at the first instance. We have to take this qualified workforce from the State and put it to work for the benefit of society.

ConJur — The OAB of São Paulo created a specialized subsection to address the issue of the allegedly irregular hiring of law firms by the public administration . Is there a kind of persecution by the Public Prosecution Service against law firms?

Fábio Medina — It is complicated to say that a bidding process is required, even in cases of mass legal services. There is always an element of trust, a bond that cannot be assessed. So I have no doubt that, with regard to law firms, there is abuse and arbitrary action by the Public Prosecution Service. It is possible to determine whether the contract is abusive or not, whether it goes beyond reasonable rules, whether the firm is hired for a case for which it could charge R$ 1 million and is charging R$ 20 million. In those cases there may be a challenge.

ConJur — And has this changed the way law firms operate?

Fábio Medina — Firms that are consistent should have no fear. They should, rather, go on to challenge the conduct of anyone who may be abusing power. Firms should also investigate. All act on an equal footing: the lawyer, the judge and the member of the Public Prosecution Service.

ConJur — Would there have to be more investigation by the legal profession?

Fábio Medina — That is the trend. Now, with the Anti-Corruption Law, law firms will gain great investigative power. Nothing prevents firms from taking on an ever greater leading role — private investigation, inquiry into wrongdoing, complaints — and from having legal remedies to use against abuse of power and arbitrariness.

ConJur — In 2012, you published an article on Criminal Action 470 in which you said that judges should not make up for the failings of accusers or investigators. Does that continue to happen? Is it happening now in Operation Car Wash (Lava Jato)?

Fábio Medina — I cannot say that it is happening in “Car Wash,” because I do not know the case in detail. When I speak of filling gaps I mean that the judge cannot make up for a deficiency in the prosecution or the investigation with a hermeneutic construction that gives elasticity to some criminal or criminal procedure rule, that reverses the burden of proof, or that subverts the presumption of innocence. The judge who presides over precautionary measures does so under very specific premises. Obviously he has the question of the plea testimony and is coming into contact with the entire body of evidence. One may question how much this affects the judge's impartiality, or whether we should have, in Brazil, the figure of the investigating judge or not.

ConJur — Should Brazilian law be amended to create the figure of the investigating judge?

Fábio Medina — There are pros and cons. In the case of the investigating judge, he will be the same judge as in the criminal action. What is the advantage? The advantage is that he accumulates knowledge of the material. If another judge comes into the case, he will not understand anything. Is that productive? From the standpoint of impartiality, obviously this has an effect. The judge who conducts the investigation already has a formed opinion, which may generate, let us say, a sense of insecurity in the defense, in the accused. But for that there is also the double degree of jurisdiction. And one cannot complain that there is a denial of the right to defense. When a case begins at the first instance, it goes all the way to the Federal Supreme Court. And with so many different actors.

ConJur — Is plea cooperation, as provided for in the legislation, effective?

Fábio Medina — Yes, it is a republican instrument, important because of the robustness now of the new means of evidence that make organized crime vulnerable. Plea bargaining is part of this system.

ConJur — Is plea cooperation unethical?

Fábio Medina — Saying that is absurd. A person who reasons that way is out of touch with this world. The State is doing the same things that criminal organizations do, entering the structures of organized crime. What cannot happen is for plea cooperation to serve as an industry of slander, obviously, but we know that the informant is obliged to prove what he says. What worries me about plea cooperation is the leaks. Whenever there are leaks, or selective leaks, it is worrying because we do not know to what extent that is part of the program.

ConJur — Would the leak be a strategy?

Fábio Medina — It may be a strategy of the State, if it has a logic tied to the efficiency of the investigative system as a whole. Because there may be a leak tied to this structure, and so it begins to create a tension that generates atypical communications and movements. With that, it manages to trigger more robust oversight.

ConJur — Do you consider leaking to be a correct strategy for the State?

Fábio Medina — No. Plea cooperation, in itself, is an instrument that is well regulated in Brazil; the institutions perhaps are not fully prepared for this negotiation. The world of private practice, definitely, is not. They still treat plea cooperation as an abusive instrument, an authoritarian instrument. In fact, it is an instrument that exists throughout the world, on the international oversight agenda.

ConJur — Is the legal profession reluctant to accept this institution?

Fábio Medina — Yes, because it still bets on old paradigms. There was an old criminal defense bar that resolved cases at the police station. Then came that other generation that worked with the units, the work with the right to silence, the work with abstract presumption of innocence. Today there is work that is about image recovery. With technology, everything is laid bare right away, and the lawyer is often only called in to put out the fire and mitigate damage.

ConJur — Have judges and the Judiciary been complicit in these leaks?

Fábio Medina — Leaks are intrinsic to a system of press freedom. Once there is press freedom, there will be no leaks only if a single person is handling the information. But once you have a lawyer, a judge, a prosecutor, a court clerk, the defendant himself, with so many people handling the information, there is no way to know who leaked it. Leaking information today is not a Brazilian phenomenon; it is a worldwide phenomenon. Often there is this concern about the leak of information on a police operation that targets so-and-so, but there are other leaks that are far worse and I do not see as much concern about them.

ConJur — What would they be?

Fábio Medina — The leak that anticipates the operation. That, yes, is a criminal leak. That is, someone leaks that the operation is going to happen, the operation happens, and at 6 a.m. it is full of the company’s lawyers. Of course there was a leak. And in the case of the press, it is not possible to press the journalist to find out where the information came from. He has source confidentiality, which is a constitutional guarantee. Leaks depend a great deal on the ethical posture of the authorities and the people involved.

ConJur — You began in the Public Prosecution Service. What was the move to private practice like?

Fábio Medina — I entered the entrance examination less than a year after graduating, placed first, and soon fell truly in love with the institution and exercised the office to the fullest. Always on the front line. The career is very stagnant. From my class, of 1991, no one has been promoted to appellate prosecutor to this day. The career is not very stimulating. Over the course of the career, I ended up delving deeply into this area, studying and producing books that had great repercussions. I ended up being invited to work for a company. I was invited because my book had become a reference at the Appeals Council of the national financial system. So I went to practice law for that group. Although I liked the Public Prosecution Service very much, I thought I was in a position to face that challenge, to have more freedom not to be stuck with the same duties, to do something different in life.

ConJur — Was it this freedom that motivated you?

Fábio Medina — Freedom, the challenge… I thought I had done a great deal in the Public Prosecution Service and would not have much more to do. Perhaps become a senior prosecutor or president of an association. I weighed all of this, the kind of challenge I would have in the private sector, and I have no regrets.

ConJur — And what is it like to be on the other side?