Corporate Compliance, Internal Investigations and Business Crime
On late February, 2021, Lázaro Baez, a local businessman with strong ties to the Kirchner family, was convicted to 12 years in prison –together with other 21 defendants, also convicted to between 9 and 2 and half years in prison- for aggravated money laundering. Baez was convicted for having laundered assets derived from corruption in public contracting and tax fraud during the Kirchners Presidencies (2003-2015).
The conviction is relevant in both political and legal dimensions:
- Even tough the decision’s grounds will only be made public in late April, a press release published by one Judge that voted in partial dissent revealed that a majority of the Court considered proved that Baez laundered the proceeds of corruption in public procurement during the Kirchner’s presidencies, in what media outlets have referred to as the “K (for Kirchner) Money Route”.
Former two-terms President and current Vice-president Cristina Fernández de Kirchner is under prosecution in a separate investigation for the predicate crime, that is to say, the public contracts awarded to Baez’s companies. Although such charges have not overcome the preliminary investigation stage yet, this conviction against Baez and other defendants certainly have an important impact on that investigation, while Ms. Fernández de Kirchner exercises the Vice-Presidency and remains as the political leader of the Government’s coalition.
- Although the money laundering offense has been in force in Argentina for more than 20 years, enforcement has been limited mainly to cases where the proceeds originated in drug trafficking or in networks of sexual exploitation or other organized crime related offenses. By contrast, this is the first decision applied to embezzlement of public funds and the use of fake invoices to hide such proceeds, and where powerful political players are involved. In that sense, it can be seen as a milestone in anti-money laundering enforcement.
- Combined penalties, according to media reports, exceeded US$ 4,300 million. The proceeds laundered were established in approx. US$ 60 million and, on top of that, fines of between 8 and 2 times the amount of the transactions were imposed to the different convicted defendants and related legal persons. For an Argentine case, this is another landmark of the conviction, which shows the increasing focus of Argentine law enforcement authorities in asset recovery.
- A convicted defendant that cooperated with the investigation was sentenced to 5 years in prison, a lower sentence than that he would have received without having cooperated. Thus, the Court has apparently upheld the so called “Repentant Law”, which incentivizes leniency agreements between defendants and prosecutors and has been under strong criticism by several high rank Government officers, including the head of the Anticorruption Office and the very President, who have been criminal law professors for many years.
- Criminal penalties were not only imposed to the convicted individuals, but also to the legal persons on behalf of which they acted. Surprisingly, such penalties were imposed even though the legal persons had not been accused, or heard –they had not been separately subjected to the criminal proceeding as defendants themselves. Although the decision’s grounds are yet to be published, it appears that the Court acted on the basis of a literal reading of article 304 of the Argentine Criminal Code -which establishes that legal persons can be criminally sanctioned when “the criminal acts (…) have been committed on behalf of, or with the intervention, or for the benefit of a legal entity”. Appellate proceedings will foreseeable answer the question whether legal persons are entitled to the right to defense and due process like any individual defendant. In this regard, Law 27,401 establishing Corporate Criminal Liability for Corruption Offenses, which is in force since March 2018, expressly grants due process rights to legal persons. Although Article 304 of the Criminal Code establishing penalties to legal persons for money laundering does not include analogous language, it had been interpreted by a majority of the legal community in line with this idea.
While most of the sanctioned legal persons were fined, one legal person was punished with the cancellation of its legal personality (the highest penalty foreseen for legal persons, for cases in which they were created with no other purpose but to commit the money laundering offense, or such acts constitute its main activity). Interestingly enough, such legal person is not incorporated in Argentina but in Switzerland. The decision’s grounds are expected to shed more light over this aspect, which at least anticipates enforcement challenges.