São Paulo: New decree regulates the Anti-Corruption Law at a state level

In brief

On November 24, 2022, the Decree No. 67.301/2022 was published by the Government of the State of São Paulo and provided for the administrative liability of legal entities for the practice of acts against the Public Administration in the city. The Decree, which comes into effect on the date of its publication, establishes the competence to judge administrative infractions, as well as it sets the jurisdictional authority to initiate an Administrative Liability Procedure (PAR) and the procedural norms for its execution.

Main aspects

Administrative Liability: jurisdictions and attributions in the State of São Paulo

• The establishment and judgment of Administrative Liability Proceedings will be the responsibility of:
  1. the Secretaries of State and the State General Comptroller’s Office when dealing with the direct Public Administration,
  2. the entity’s top management when dealing with indirect Public Administration.

The establishment and judgment of Administrative Liability Proceedings may be exercised ex officio by the respective authorities. This competence may be delegated, but never more than once.

1. the State General Comptroller’s Office, when able to verify:
   1. the omission by the responsible authority from the Public Administration regarding the establishment and judgment of the PAR;
   2. the lack of objective conditions for the originating body/entity to initiate or judge the administrative procedure;
   3. complexity, repercussion and pecuniary and/or material relevance;
   4. the involvement of more than one agency of the Public Administration of the State of
      São Paulo.

The State General Comptroller’s Office may also call up a PAR already in place, to examine the regularity of its proceedings and, if necessary, to rectify it, since the public body has the competence to apply the appropriate administrative penalties. The public bodies and entities originally competent to establish and judge the PARs are obliged to forward documents and information when requested by the State General Comptroller’s Office.

The jurisdictional authorities, after identifying a possible occurrence of an act harmful to the Public Administration, must decide, upon justification, to initiate an Administrative Liability Procedure, open a Preliminary Investigation or archive the matter.

Preliminary Ascertainment

• Will be applicable when there are not enough elements to characterize the infraction or define its authorship;
• Must observe the period of 180 days, which may be extended for the same period;
• Will be confidential and non-punitive;
• Will be conducted by a Commission of at least two public servers appointed by the initiating authority.

The Commission may propose, by means of a conclusive report, the initiation of an Administrative Liability Procedurewhen there are indications of an act harmful to the Public Administration. Otherwise, it must determine the closing of the preliminary investigation.

Administrative Liability Procedure (PAR)

• Will be conducted by a Processing Commission of at least two civil servants from the initiating authority;
• Directed to legal entities;
• When established by the State General Comptroller’s Office, it will be conducted by a processing Commission composed of its members;
• It will observe the period of 180 days, with the possibility of extension;
• Should guarantee the right to defense and preserve secrecy.

The Processing Commissions may, at any part of the process, forward to the State General Comptroller’s Office – or to the body responsible for representing the injured entity – a judicial measures proposal for:

1. Processing of infractions;
2. Ensure payment of the defined fine;
3. Reparation of the damage caused to the Public Administration.

The indicted legal entity will have a period of 7 days after the citation to present final allegations.
Upon completion of the works, the Commission must prepare a report on the facts ascertained, containing the description of the imputations, the exposition of the arguments presented by the defense, the analysis of the existence and functioning of the Integrity Program of the investigated legal entity and the conclusion about of its responsibility.

The Processing Committee may decide to:

1. apply of sanctions;
2. forward the records, when infractions are identified to be investigated in other instances;
3. filing of the Administrative Liability Procedure.

An appeal with suspensive effect may be filed against the administrative decision within a period of
15 days.

Administrative Sanctions

• The legal entities considered responsible at the end of the process will be subject to the imposition of a fine and extraordinary publication of the condemnatory decision. Both sanctions do not exclude the obligation to fully repair the damage caused to the Public Administration;
• The fine to be imposed will be between 0.1% and 20% of the gross revenue of the legal entity in the year immediately prior to the establishment of the PAR;
• The formula for calculating the fine will be defined in an act by the State General Comptroller’s Office;
• If it is impossible to estimate the gross revenue for the previous year, the fine imposed will be calculated based on the gross revenue for the year in which the harmful act occurred or on the estimated revenue for the previous year;
• The conclusion of a leniency agreement will imply a reduction in the amount of the fine to be imposed.

The sanction in the form of publication of the condemnatory decision must be complied with via publication in a widely circulated communication medium in the legal entity’s area of ​​operation and in a public notice posted at the establishment itself and highlighted on the main page of the legal entity’s website. All forms of publication must be fulfilled cumulatively.

Leniency Agreement

• Celebrated, with exclusivity, by the State General Comptroller’s Office;
• Will receive confidential treatment during the proposal phase, unless authorized disclosure by the proponent before closing the agreement;
• Can be carried out until the conclusion of the PAR’s Final Report;
• May be subject to withdrawal by the legal entity before its subscription, as well as may also be rejected by the State General Comptroller’s Office.

Legal Entity’s Integrity Program

• Will be evaluated, as to its existence and application, based on:

1. The commitment of the top management of the legal entity;
2. The standards of conduct, code of ethics, integrity policies and procedures;
3. Conducting periodic training;
4. The periodic analysis of risks with a view to necessary adaptations/improvements;
5. The existence of records of procedures and internal controls;
6. The degree of independence of the internal body responsible for the Program;
7. Maintaining a reporting channel, as well as its proper disclosure;
8. The adoption of disciplinary measures that may be applicable and/or necessary;
9. The monitoring of possible irregularities and/or illegalities in mergers and acquisitions in which the legal entity participates or intends to participate;
10. In the monitoring and continuous improvement of the Integrity Program.

State Register of Punished Companies
Sanctions applied based on Decree No. 67,301 will be gathered and published in the State Register of Punished Companies – CEEP. The registration must contain the corporate name, the registration number, the sanction applied and the final date of validity of the limiting/sanctioning effect applied to the legal entity.

Relevant points

• The provisions of Decree 67,301 provide greater legal certainty to investigations and sanctions for administrative infractions within the jurisdiction of the State of São Paulo.
• The PARs already in progress must observe, from the entry into force of this Decree, what is established therein. The acts already produced can and should be used, as long as they do not contradict the procedural provisions now in force.