The Notebooks Case: cooperating defendants enhance anti-corruption enforcement in Argentina

October 2018 | PROFESSIONAL INSIGHT | FRAUD & CORRUPTION

Financier Worldwide Magazine

October 2018 Issue

In late 2016, a new law came into effect in Argentina allowing individual defendants in certain corruption cases to cooperate with authorities in exchange for a reduction in penalties. This statute had almost no use until the ‘Notebooks Case’ was disclosed by the press in August 2018.

This case, which is most likely the fastest and broadest anti-corruption investigation in Argentine history, was triggered by a former policeman who disclosed a set of handwritten notebooks to an investigative journalist.

The notebooks were written by a friend of that policeman who had been the driver of a former public official in the Argentine government for several years. The handwritten tales in the notebooks describe alleged visits to different locations to pick up large bags full of cash that were later delivered to high-ranking Argentine public officials. Allegedly, major government contractors explicitly and implicitly referenced in the notebooks were involved in those cash payments.

Upon receiving the notebooks, the journalist made digital copies, reviewed the contents and returned them to the ex-policeman. Then, in early August 2018, the authorities raided the driver’s home and detained him, and the media started openly reporting about a case that has caught attention around the world.

Since then, there have been more than 70 raids and many assets seized, including more than 250 valuable paintings, cash in different currencies for more than $1m, several cars and electronic equipment. Further, 26 individuals have been detained and 17 have turned into cooperating defendants, including both former public officials and businessmen. These numbers are increasing day by day.

The prosecutor in the case, when making reference to the notebooks, stated that he had never seen “this kind of evidence”. He also said that he “obtained in two weeks more evidence than he could have dreamed of obtaining”.

The notebooks and the 2016 law of cooperating defendants are the key reasons for this case moving at an unprecedented pace. Additionally, the federal government is offering a 10 percent reward to those who provide information that leads to the recovery of money or goods in the course of the investigation.

Applicable procedure requires that defendants willing to cooperate enter into a cooperation agreement with the prosecutor. Such an agreement is then subject to review and approval by the judge overseeing the case. If the agreement is approved, the prosecutor or the judge must verify within one year whether the information provided by the cooperating defendant was truthful and useful to the investigation.

In any case, the allegations described above are still under investigation and the case is still at a very early stage. Indeed, authorities are trying to keep up with handling testimony from cooperating defendants and using whatever time and resources they have left to handle other procedures related to the investigation.

The cross-border ramifications of the case are still unclear. However, if other countries join the investigation, it is likely that the authorities will cooperate similarly as they did in the Lava Jato and other anti-corruption cases, making the Notebooks Case even more complex.

This is a landmark case in anti-corruption enforcement in Argentina that companies doing business in the country should follow closely to learn the new dynamics of these investigations. Analysing the potential direct or indirect impact of the investigation on a company’s rights or obligations should also not be underestimated. Further, this case is also a unique opportunity for companies to emphasise the relevance of anti-corruption compliance programmes and to review whether they meet the requisites of Argentina’s recent law making legal entities criminally liable for bribery and other illegal interactions with public officials.

The law on cooperating defendants enacted in late 2016, the law making legal entities criminally liable for certain corrupt conducts in force since March 2018, and the astonishing Notebooks Case are strong signals that Argentina truly wants to meet international anti-corruption standards. However, this case is a double-edged sword, since it has built strong expectations and many stakeholders may feel disappointed if the case enters a slower phase at any time in the future.

Gustavo L. Morales Oliver is a partner at Marval, O’Farrell & Mairal. He can be contacted on +54 11 4310 0100 ext. 2206 or by email: glo@marval.com.

Gustavo L. Morales Oliver

Marval, O’Farrell & Mairal