Interview with Rafael Gomes - Chief Governance and Compliance Officer at Petrobras

Since May 2018, Rafael Mendes Gomes has been chief governance and compliance officer at Brazil’s most valuable company, Petrobras. In this interview, he discusses how compliance and governance have played a key role in changing the company’s fortunes since its embroilment in Operation Car Wash.

Posted vendredi, mars 15 2019
Interview with Rafael Gomes - Chief Governance and Compliance Officer at Petrobras

Rafael Mendes Gomes has been chief governance and compliance officer at Petrobras since May 2018.

Leaders League. What has enabled Petrobras to successfully recover from a major scandal like Car Wash?

Rafael Gomes. The current success of our corporate governance and compliance program lies in a profound analysis of internal root causes. It was not a matter of simply picking up the guidelines of the Department of Justice or the FCPA resource guide and saying ‘Let’s do this’. The starting point was conducting an exhaustive investigation initiated by the board of directors after Paulo Roberto Costa’s plea agreement.

Petrobras reacted to the scandal in a rigorous and immediate manner by appointing an independent investigation committee and providing it with total independence to conduct investigations thus ensuring its credibility.

In December 2014, the special committee was formed with former Supreme Justice Ellen Gracie Northfleet and former Siemens compliance officer, Andreas Pohlmann, to conduct the investigation and serve as a bridge between the board of directors and authorities in their different ongoing investigations. The company’s chief governance and compliance officer position was also created around this time to guarantee the autonomy of compliance initiatives within Petrobras. Finally, Brazil’s leading compliance law firm of the time, Trench Rossi Watanabe, as well as world-renowned forensic accounting and investigations firm, EY, were retained to carry out the investigation. 

Investigations by the Federal Police, the Public Prosecutor’s Office and the Operation Car Wash task force took place simultaneously whilst several companies implicated in the scandal negotiated leniency agreements with the Comptroller General of the Union. Petrobras cooperated with these authorities to understand the full extent of what had occurred and to confirm the reports given by collaborators to authorities. We realized the path of cooperation would be painful but best for our interests in the mid-to-long-term.

Understanding exactly what happened, who was involved, how irregular transactions were approved and the general modus operandi of corrupt parties was essential to identifying the root causes of what needed to be changed at Petrobras.



What key initiatives have been implemented at Petrobras to avoid similar scandals?

Overhauling the company’s administrative structure was essential. Before Car Wash, our management was decentralized and hierarchic which meant major decisions enjoyed little to no oversight and each department or division operated as a silo. For example, a centralized legal department or even a compliance department did not exist to question suspicious transactions. Reviewing our model of governance was key to mitigating the potential for future infractions.

This meant previously separate internal systems, registries and controls now had to be one and the same across Petrobras. Standardizing our systems provided greater transparency due to the sharing of information. Today, we enforce a ‘four eyes’ policy which requires a minimum of two people for any administrative decision to be made. Moreover, our guidelines now require key decisions to go through an executive board or a technical committee.

Furthermore, anyone joining Petrobras in an administrative role is now subject to a previous review of qualifications and experience as well as an integrity background check. I underwent this myself and, over the last four years, we have conducted over 1,900 integrity background checks. The hiring of management is now also approved by an independent committee. The Committee of Appointments, Compensation, and Succession (CIRS) appraises candidates selected by a headhunter or via internal selection processes, interviews them, and refers three names to the board of directors which makes the final decision.

Precautionary bans, a legal instrument created by Petrobras' legal department, were implemented to prevent companies directly implicated in the Car Wash cartel from doing business with us. Implicated companies wishing to conduct business with Petrobras must cooperate with any ongoing investigations, enter a leniency agreement with authorities, agree to being held accountable, sign a formal agreement of non-recidivism and lastly, implement a compliance program to Petrobras’ satisfaction. If these criteria are not met, Petrobras suspends all activities with the party in question. However, when parties fully meet these criteria – Odebrecht, for example, concluded its implementation of these measures in September of 2018 - business can return to normal.

In 2015, Petrobras implemented integrity due diligence checks for all our suppliers which meant reviewing their backgrounds for any reputational risks or irregularities. Since then, we have conducted over 19,000 integrity due diligence reviews. Companies are evaluated on objective criteria - such as previous infractions and the strength of internal corporate governance – and are then classified as being of high, medium or low risk.

With both medium and low risk companies we monitor the issues flagged up during due diligence checks and request further information on the identified risks. If companies mitigate these risks, they may return to a normal working relationship with Petrobras. High risk companies, on the other hand, cannot do business with us before agreeing to implement risk-mitigating policies.



How has the compliance department been strengthened in recent years?

Today, the compliance and corporate governance department at Petrobras has close to 450 professionals dedicated to risk prevention, detection and mitigation. We began 2018 with a little over 300 professionals and over the last 12 months alone, have recruited 129 new employees - a growth of over 40%.

In 2015, we relaunched our Integrity Hotline and once staff understood it is an independent and anonymous mechanism, our department began to receive a growing volume of reports which, of course, means more investigations. As such, we have just recruited 70 new employees specifically for this sector which should dramatically increase our internal investigation capabilities.

To put things into perspective, Decree N. 8420, which regulates the Brazilian Anti-Corruption Act (N. 12.846), contains 16 different criteria for the evaluation of compliance programs and, today, Petrobras meets every single one. Recently, the company’s investments in corporate governance and compliance have been recognized by the market through numerous awards including the Brazilian Stock Exchange’s certification in the ‘Outstanding Governance of State-Owned Companies Program’, the ANEFAC Financial Statements Transparency Trophy and the IG-SEST certification for ‘Excellence in the Governance of a State-Owned Company’ amongst others.

From now on, our challenge is to ensure compliance becomes an increasingly relevant part of our day-to-day and to instill an ever-stronger culture of compliance within Petrobras.  



What is the future of compliance in Brazil?

Compliance has undoubtedly matured in Brazil and companies investing in the sector are now being positively recognized by the market with Petrobras being a great case-study. If we consider the lessons learned by internal investigators and compliance professionals since the beginning of Car Wash, we understand why compliance in Brazil has come so far in a such a short space of time. Legal and forensics experts have developed enormously due to the intensity and complexity of cases which means they are now better prepared for the future.

However, before hiring compliance professionals, companies must first understand what their internal demands and needs are. For example, if companies previously involved in violations do not conduct comprehensive internal investigations, carry out a compliance risk assessment and identify the key issues which need to be addressed on an administrative level, no compliance professional will be able to help enact the necessary changes.


By: François Le Grand