The rumors circulating in Brazil’s major cities turned out to be true. The business sector woke with a start today with the arrest and questioning of ranking executives of Petrobras and representatives of Petrobras suppliers with contracts in the billions of dollars, all as part of Operation Lava Jato (Carwash). Panic has been a more than adequately justified response by the recipients of 85 arrest warrants served Friday at home and in the offices of public works contractors (some of them as emblematic and institutional as Odebrecht and Camargo.)
The worries began in late October with the affidavit of Julio Camargo, an executive with engineering company Toyo-Setal, the first of the “penitents” from outside Petrobras to testify to a network of bribes, commissions and money-laundering that has jolted public opinion and, according to the Federal Police, may have siphoned off billions of dollars.
Camargo is not just a ranking executive of a firm whose annual contracts with Petrobras are worth R$ 3.5 million (it is the largest such company in Brazil). “It was at the heart of the corruption scheme,” as a source close to the investigation had said several weeks earlier. Three companies under its control (Treviso, Piemonte e Auguri) made million-dollar deposits into fictitious firms used by the black market money-changer Alberto Youssef, a key figure in the network and the second “penitent” to plea bargain with the federal Public Ministry.
The first to talk had been who else but Paulo Roberto Costa, the powerful ex-director of Supply at Petrobras, who admitted before a judge that an institutionalized scheme of bribes existed and that the Workers Party (PT) pocketed 1% to 3% of all the contracts signed between 2004 and 2012. PT rival (?) PMDB and the oppositionist PSDB also took advantage, though supposedly for a smaller sum.
The same applies to the parallel «payola» cases, or case, in the singular, given the parallel graft schemes that sustained the PSDB in 1998 (Minas Gerais) and the PT, among others, in 2002 (national) elections.
Most importantly, this testimony confirms a fundamental fact: The scheme involved all of the public works contractors that worked for Petrobras and was a generally cost of doing business.
Actually, catching the corruptors was not the initial focus of the investigation, launched in March of this year; the focus shifted to the contractors who negotiated plea bargains, including Costa and Youssef and, above all, [the aristocratic family-owned] Camargo. Prior to Camargo’s appearance, the contractors had adopted a unanimous position, denying their supposed payment of bribes.
A flash of memory: Geoffrey Weigand and the tobacco CEOs.
After this deposition, the other public works companies were deeply agitated and this unanimity began to dissolve, with each looking to save their own hide. The Attorney General of the Republic, Rodrigo Janot, said this week that at least nine persons have already signed plea agreements.
On behalf of Toyo-Setal, Augusto Ribeiro de Mendonça, joined Camargo after it signed its plea deal. As it happens, Ribeiro de Mendonça is president of ABENAV (the Brazilian Association of Naval and Offshore Construction) and vice-president of the National Union of Naval Repair and Construction (Sinaval), the two organizations most representative of the sector, which prefer not to comment. “They are all involved”, according to a lawyer involved in the case, who asked that he not be named. “It could well end in a massacre.” Among the subjects arrested today, 20 work for the largest public works companies in Brazil. Four are CEOs of large companies. According to the daily O Globo, one of the accomplices of Renato Duque (ex-director of Serviços at Petrobras, currently incarcerated) dispersed, personally, with his own hands, more than $ 100 million. The petroleum giant hired two law firms to investigate the supposed fraudulent dealings of the company.
These arrests represent one more about-face in a huge operation that puts the celebrated «monthly payola» of the PT to shame. “These executives are telling the true story of how the scheme operated: If you didn’t pay, you got no deal. They created special funds for payments,” said Adriano Pires, director of the Brazilian Infrastructure Center (CBIE). “For the first time we are seeing how the country is run, as occurred some years back with the operations against the Mafia in Italy. The relations of politicians and private interests must change … It all depends on how far the negotiations get, until you finally reach the government. This is a chance to reform politics, morality, and respect for honest labor. No one knows who is the ultimate responsible party, or until now, who is implicated. …”
What is the profile of a corrupting agent who agrees to pay enormous illegal commissions in order to land billion-dollar contracts? Little is known about the House of Camargo and its private life, for example, though it is known for its passion for horse racing … It will likely have to cut back on its political contributions: In Campaign 2010, it was among the largest donors in the country: R$ 1.12 million, distributed among seven politicians. The Camargos maintain an exorbitant lifestyle: according to Veja, they lent their private jet to former presidential chief-of-staff José Dirceu, the principal defendant in the «monthly payola» – he served two years in 2013-14 – to travel across Brazil after leaving office.
Actually, he is currently under house arrest, I believe, from where he blogs.
The origin of the well-lubricated corruption and money-laundering scheme goes back to 2004, when Dilma Rousseff was appointed Minister of Mines and Energy. One of her first decisions was to establish “Buy Brazil” policy with Petrobras, in order to keep jobs in Brazil and development technically. Brazil considerably expanded its maritime sector, to the point that the companies investigated in Operation Carwash held R$ 59 billion in contracts with the oil giant, from 2003-2014. Not yet explained is the case of six suspect firms where solid evidence is lacking: It is not unexpected that the weeks to come will bring fresh arrests of executives accused of operating as corruptors.
In all, Brazil is in the midst of four contracting scandals, one involves Petrobras and another the formation of cartels in bidding on projects for the São Paulo commuter rail. “Car Wash” focuses on a vast cartel in public works projects such as very large dams. As the Estado de S. Paulo relates today, “Carwash contractors involved in S. Paulo cartel case.”
The opposition to the PT points to the trial and conviction of the former top aide to Lula as evidence of corruption endemic to the party. As it happens, however, now that AP 470 has been judged, it is time to schedule the complex portfolio of cases of the «Valerioduto» — the PSDB embezzlement and laundry operation from the late 90s and early Oughts. As a wise man once said,
For our friends, anything; for our enemies, the law
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