The Royal Court of Jersey has recently passed judgment in the case of The Municipality of Sao Paulo and another v Durant International Corporation and another. Advocate Stephen Baker, Senior Partner of Baker & Partners, was instructed on behalf of the Plaintiffs by Lawrence Graham LLP.
The judgment, which was handed down on Friday 16th November, is the first substantive judgment to be given as part of the international effort to bring former Sao Paulo Mayor, Paulo Maluf, and others to account for their respective roles in a corrupt scheme which defrauded the Brazilian treasury of many millions of Reals (R$).
The case concerned issues of major fraud and widespread corruption in public office, surrounding the completion of a major public works contract; the Avenida Agua Espraida, in Sao Paulo, Brazil.
The Royal Court found unhesitatingly in the Plaintiffs’ favour that between the period of late 1997 and early 1998 a major fraud was operated for the benefit of, amongst others, Mr Maluf, whose participation in the scheme placed him in breach of the duties he owed to the Municipality as Mayor.
During this period, the sum of R$13.5 million (US$11.1 million) were diverted from the Municipality via a meticulously planned and highly sophisticated system of over-invoicing.
Of this sum (after conversion to U.S. dollars), US$10.5 million was traced through a series of payments made by Brazilian black market currency dealers (“doleiros”) to an account held in New York for Mr Maluf. The Court held that Mr Maluf’s son, Flavio, was responsible for arranging these payments on his father’s instructions, or with his approval, knowing full well the ‘tainted’ nature of the funds.
These monies were subsequently traced to accounts held at Deutsche Bank in Jersey in the names of the Defendant companies.
The Court found that the Defendant companies were and continue to be beneficially owned by Mr Maluf and his family. Importantly, the Court also found that the Defendant companies were controlled by Mr Maluf directly, or indirectly through his son, and that their knowledge of the tainted nature of the funds could be attributed to the companies.
Advocate Baker commented: “The Federal Republic of Brazil and Municipality of Sao Paulo are very pleased at this extremely strong judgment”.
Criminal and civil asset recovery proceedings remain on-going in both Brazil and New York. It is understood that the lawyers for the Defendant companies will be appealing the judgment