Negotiating Justice: Responding to Corporate Wrongdoing in Brazil

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In a nutshell, ineffective substantive laws have a demoralizing effect by failing to address the underlying incentive asymmetries that foster an environment conducive to corporate wrongdoing. From an institutional perspective, low detection rates-resulting from the intrinsic challenges of building cases against well-counseled corporations-coupled with competitive markets' risk-taking orientation represent rational incentives for corporate wrongdoing as a form of profit maximization. More importantly, from an individual perspective, the corporate sanctions that result from detection have also traditionally not resulted in optimal policing as they inefficiently distribute the burden of the offense. Managerial executives of publicly held firms, often minority shareholders, accrue more personal benefit from engaging in crime than lose through decreased dividends if the crime is detected. The burden of the substantial fine thus falls not on the perpetrators but on the shareholders and consumers of the corporations' goods and services. Therefore, the threat of sanctions imposed on the firm, as opposed to the individual wrongdoer, has an insufficient deterrent effect.(ii) Research Questions1. How do shortcomings in the definition of corporate personhood impede the effective prosecution and sentencing of corporate entities?2. How can systemic corporate wrongdoing be conceptualized as the expected rational outcome in settings where the failures of substantive criminal law create inbuilt distorted incentives for illegality?3. Is the institution of negotiated justice the most effective vehicle for responding to such scenarios?4. How can the Deferred Prosecution Agreement overcome the shortcomings of the Leniency Agreement and break the punctuated suboptimal equilibrium of business transactions in developing countries? In light of the increasingly important role played by negotiated justice in responding to corporate wrongdoing around the world, available literature is still limited and focuses greatly on the experiences of developed nations where corporate crime is punctual, rather than systematic. Moreover, recent scholarship in behavioral economics reveals why the Leniency Agreement fails to alter firm behavior but fails to consider alternative policies. Regarding the Brazilian casestudy, this research project will seek to contribute to a sadly underdeveloped field characterized by a marked paucity of specialized literature, both within domestic and international academic circles, despite its tangible repercussions in Brazilian legislative and economic policymaking today. With the recent Leniency Agreements signed by Lava Jato defendants with the United States, Switzerland and a number of South and Central American nations, the case study has gained international involvement and significance and coined "the largest foreign bribery case in history" by the U.S. Department of Justice.