Petrobras Corruption Scandal

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Petrobras

Formed in 1953 as Brazil’s national oil company, Petróleo Brasileiro is one of Latin America’s largest companies. The government holds a majority stake, but it is also listed in Sao Paulo and New York and counts thousands of ordinary Brazilians among its shareholders.

After being partly privatized by the centrist government of Fernando Henrique Cardoso in the 1990s, the leftist Workers’ Party (PT) government of Luiz Inácio Lula da Silva steadily restored state control of the company during his eight-year rule which ended in 2010.

This process was turned into a patriotic cause when in 2007 Petrobras discovered the “pre-salt” oilfields, so-called because the oil lies under a two-kilometer-thick layer of salt, which is itself under the ocean. As the biggest deepwater offshore oil find in decades, the PT was keen to keep the pre-salt out of private hands. It invented a new regulatory regime that made Petrobras the sole operator of the pre-salt discoveries, leading the company to embark on what was the biggest corporate capital expenditure program in the world.

Why has it become embroiled in scandal?

The PT and its coalition partners appointed their own candidates to Petrobras’ most important executive positions. These figures, led by Paulo Roberto Costa, a former director, secretly diverted funds valued at up to 3 per cent of all contracts to the PT and its coalition partners. This amounted to billions of dollars because of the huge investment in the pre-salt and an accompanying refinery program.

The corrupt directors collaborated with Petrobras’ contractors, including some of Brazil’s largest construction companies, to line their own pockets. Some of the directors accumulated funds of more than $100m in Swiss bank accounts while others put the money into extravagant art collections. They were assisted by a ring of black market money dealers, led by convicted criminal Alberto Youssef, who was in charge of laundering the funds. Investigators suspect the scheme was part of a “project of power” to keep the PT and its allies in government by using funds from Petrobras to pay off the ruling coalition and fund election campaigns. The PT denies such claims, saying all its election campaigns were funded legally.

What political parties are involved?

The main political parties accused of benefiting from the bribery scheme are the ruling Workers’ Party, whose former treasurer João Vaccari Neto has been jailed in the case, as well as its coalition partners, the PMDB and the PP. But the opposition PSDB party has also been mentioned by some witnesses. All parties deny wrongdoing.

Why is the investigation called Lava Jato, or Car Wash?

Police first began tracking the black market money dealers, or doleiros, at the Posto da Torre, a petrol station in Brasília which also had a money exchange business. The doleiros eventually led investigators to Paulo Roberto Costa, enabling them to discover the corruption at Petrobras. That was 2014. Since then, investigators have uncovered R$6.2bn in bribes paid and total losses to the state estimated at between R$29bn and R$42bn. They have charged 179 people with criminal offences and secured 93 convictions. Added together, the sentences equal nearly 1,000 years in jail.

Who is Sergio Moro?

Sergio Moro, a federal judge in the southern city of Curitiba who has handled most of the cases stemming from the investigation, is known for his efficient and fearless judgments, such as his jailing for over 19 years of one of Brazil’s most powerful businessmen, construction boss Marcelo Odebrecht. The judge’s admirers credit him with ending Brazil’s culture of impunity for the rich and powerful. His detractors accuse him of siding with the opposition or riding roughshod over civil rights, such as the presumption of innocence.

What does Mr Lula da Silva have to do with it?

The former president is suspected by prosecutors of collaborating with some of the key construction companies involved in the Petrobras scandal, including the Odebrecht Group and OAS, in return for receiving favors. He denies wrongdoing.

Lula’s arrest happened just after he announced that he would consider running for president in the next elections. Lula’s return to the presidency is seen as one of the only ways the left-wing Brazilian Workers’ Party could stay in power since current President Dilma Rousseff has seen public support plummet – mainly for her alleged connection to the Petrobras scandal and Brazil’s weakening economy.

But critics say both Rousseff and Lula are facing a smear campaign by opposition parties, seeking to make it look as though the ruling PT party has lost control.

Following the announcement that he could potentially run again for president – what would be a major blow to the country’s right-wing opposition given his popularity – he was arrested for allegedly orchestrating a plot to buy off a witness in the Petrobras scandal and was later detained on suspicion that he had directly benefited from the scandal.

If a judge decides to send him to trial, Lula could face up to 13 years in prison, essentially barring him from the next presidential election.

Lula da Silva caricature and quote "everyone is innocent unless proven otherwise"First woman president

  • 2010 October – Dilma Rousseff, of President Lula’s Workers’ Party, wins second round run-off to become Brazil’s first female president.
  • 2011 June – President Rousseff’s chief of staff resigns amid corruption allegations.
  • 2013 October – The rights to explore Brazil’s biggest oilfield are awarded to a consortium led by the state-run energy giant Petrobas backed by French, Anglo-Dutch and Chinese firms. Critics say that allowing foreign companies a stake in the Libra oilfield will damage national interests.
  • 2014 October – Incumbent Dilma Rousseff wins another term as president.
  • 2015 March – Petrobras state oil company implicated in massive corruption scandal that brings hundreds of thousands onto the streets in protest at President Rousseff, who was company chairperson during the period in question.
  • 2015 August – Hundreds of thousands of protesters march to demand President Rousseff’s resignation, blaming her and the leftist Workers’ Party over alleged large-scale corruption and looming recession.
  • 2015 October – Top finance court says government borrowed billions illegally to offset 2014 budget shortfall. Election commission reopens probe into allegations that President Rousseff misused funds during 2014 presidential election campaign.
  • 2015 December – Congress agrees to launch impeachment proceedings against President Rousseff.
  • 2016 March – Junior coalition Democratic Movement Party leaves government. Judge bars President Rousseff from appointing ex-president Lula da Silva to her cabinet after he is accused of money-laundering, which he denies.
  • 2016 April – Lower house of Congress votes overwhelmingly in favor of sending impeachment motion against President Rousseff to Senate. She rejects the accusations that she manipulated government accounts during the 2014 presidential election campaign and accuses her opponents of launching a “coup d’état” against her.
  • 2016 May – Senate votes overwhelmingly in favor of subjecting President Rousseff to an impeachment trial. She is suspended from her post pending the trial.
  • 2016 August: Senators vote to remove President Dilma Rousseff from office for illegally using money from state banks to bankroll public spending. Michel Temer is sworn in to serve the rest of her term to 1 January 2019.

Dilma Rousseff caricature and quote "today is the day that 61 men, many of them charge and corrupt, threw 54 million votes in the garbage"Operacao Lava Jato – Operation Car Wash

17th March 2014, The Federal Police of Brazil and Judge Sergio Moro began an investigation, initially looking at money laundering and later expanded to cover allegations of corruption at Petrobras (state-controlled oil company.) The investigation remains live.

20th March 2014, Paulo Roberto Costa, former director of supply for Petrobras between 2004 and 2012 was suspected of destroying documents. The investigation discovered that Albert Youssef obtained a Range Rover Evoque for Paulo Roberto Costa. Evidence indicated that improper payments had been made to Youssef from companies that won RNES (Abreu & Lima Refinery) contracts. Costa and Youssef entered a plea bargain and the scope of the investigation was widened to nine major Brazilian construction companies and by association any joint venture partners they may have had. The nine companies were: Camargo Correa, Construtora OAS, Engevix, Galvao Engenharia, IESA Oleo e Gas, Mendes Junior, Odebrecht, Queiroz Galvao and UTC Engenharia

The investigation into the Petrobras corruption scandal is called Operacao Lava Jata (Operation Car Wash) in reference to the car washes that exist at Brazilian gas stations.The Federal Police of Brazil and Judge Sergio Moro began an investigation on the 17th March 2014, initially looking at money laundering and later expanded to cover allegations of corruption at Petrobras (state-controlled oil company.) The investigation remains live.

An alleged criminal ring used the Posta da Torre (Tower Gas Station) in Brasilia to move illegally acquired money. Initially the businessman Hermes Magnus reported an attempt to launder money through Dunel Industria e Comercio. Ultimately four large criminal rings were identified, headed by Carols Habib Carter, Alberto Yossef, Nelma Kodama and Raul Henrique Srour. In total 17 people were investigated and it was suspected that Youssef was the ring leader.

Key Facts

Petrobras Corruption - Operation Car Wash / Operacao Lava Jato

  • $17 billion Petrobras write off
  • $11.3 billion reimbursement requested
  • $1 billion of misappropriated funds
  • 260 people investigated
  • 200 arrests
  • 90 convictions
  • 16 companies involved

Timeline

  • 20th March 2014, Paulo Roberto Costa, former director of supply for Petrobras between 2004 and 2012 suspected of destroying documents. The investigation discovered that Albert Youssef obtained a Range Rover Evoque for Paulo Roberto Costa. Evidence indicated that improper payments had been made to Youssef from companies that won RNES (Abreu & Lima Refinery) contracts. Costa and Youssef entered a plea bargain and the scope of the investigation was widened to nine major Brazilian construction companies and by association any joint venture partners they may have had. The nine companies were: Camargo Correa, Construtora OAS, Engevix, Galvao Engenharia, IESA Oleo e Gas, Mendes Junior, Odebrecht, Queiroz Galvao and UTC Engenharia.
  • 11th June 2014, discovered that Paulo Roberto Costa has deposits of $23 million in Swiss Bank accounts.
  • 8th October 2014, the former accountant of Youssef, Meire Poza says that Youssef negotiated R$25 million with the president of Senado, Renan Calheiros and he also had business with ex-minister of cities, Maria Negromonte.
  • 15th November 2014, Augusto Mendonca Neto, from Toyo Setal, reveals that he paid up to R$60 million in bribes to former Petrobras Services director Renato Duque
  • 16th November 2014, prosecutors say that R$154 million was payed to PT and PMDB
  • 8th December 2014, the Epoca magazine documents reveal that Camargo Correa paid R$886,000 to a company of former minister Jose Dirceu
  • 14th January 2015, Former Petrobras international director, Nestor Cerveró is arrested by the Federal Police on charges of corruption and money laundering
  • 28th January 2015, Petrobras President Graca Foster announces that the Petrobras Board of Directors have calculated that a loss of R$88.6 billion has been realised due to the corruption associated with Lava Jato
  • 4th February 2015, Graca Foster and five other directors resign from Petrobras
  • 5th February 2015, the former services manager of Petrobras, Pedro Barusco estimates that PT received bribes in state contracts between $150-200 million
  • 6th March 2015, Minister Tori Zavascki of the STF authorises the investigation of 47 politicians in Lava Jato
  • 16th March 2015, former director of Petrobras Services Renato Duque, Sao Paulo businessman Adir Assad and Lucelio Goes are arrested
  • 27th March 2015, Federal police hold Dario Queiroz Galvao Filho, a partner at Galvao Engenharia
  • 10th April 2015, Former deputy Andre Vargas and former federal deputy Luiz Argolo are detained.
  • 15th April 2015, Treasurer of PT is Joao Vacceri Neto is arrested on suspicion of receiving bribes from Petrobras contracts
  • 18th April 2015, the vice president of Camargo Correa, Eduardo Hermelino Leite admits that his company paid R$110 million in hush money to keep feeding the corrupt system
  • 22nd April, eight men are convicted, including Paulo Roberto Costa and Alberto Youssef
  • 9th May 2015, according to Folha de Sao Paulo, Ricardo Pessoa of UTC says that he donated R$7.5 million to Dilma Rousseff’s presidential re-election campaign due to fear of retaliation
  • 21st May 2015, businessman Milton Pascowitch, one of the scheme operators is arrested. According to the Federal police JD Consultoria (owned by former Minister of the Civil House and former chief of staff to President Lula Jose Dirceu received more than R$1.4 million in payments from Pascowitch’s company Jamp Engenheiros Associados Ltda.
  • 26th May 2015, former director of International Operations at Petrobras, Nestor Cervero is sentenced to five years in prison for the crime of money laundering
  • 19th June 2015, Federal Police hold the presidents of Odebrecht and Andrade Gutierrezm Marcelo Odebrecht and Otavio de Azevedo and other executives of the contractors. According to the investigators, the companies in a sophisticated way in the scheme of corruption and frauds of Petrobras, which involved payments of bribes to directors of the state via foreign bank accounts
  • 2nd July 2015, former director of International Operation in Petrobras, Jorge Zelada is arrested as it is suspected that he was one of the beneficiaries of the corruption scheme. Authorities of the Principality of Monaco block €10 million of Zelada’s account
  • 14th July 2015, the Federal Police undertake search and seizure warrants at the homes of six politicians; Fernando Collor, Ciro Nogueira, Eduardo da Fonte, Mario Negromonte, Fernando Bezerra Coelho and Joao Pizzolati. At the house of Collor the police confiscate a Ferrari, a Porsche and a Lamborghini
  • 16th July 2015, former Toyo Setal consultant Julio Camargo says that the mayor of the city, Eduardo Cunha requested a $5 million payment for a Petrobras drilling contract to be made possible
  • 19th July 2015, nine people are indicted by the Federal Police in relation to the construction company Andrade Gutierrez. Among them is the president of the contractor, Otávio Marques de Azevedo
  • 20th July 2015, three executives of Camargo Correa are convicted of money laundering, corruption and criminal organization. They are Dalton Avancini, Eduardo Leite and Joao Ricardo Auler
  • 27h July 2015, a document seized at Odebrecht shows that senior Petrobras employees received gifts from the company’s former director Rogerio Araújo
  • 28th July 2015, The Federal police arrest the CEO of Eletronuclear, Othon Luiz Pinheiro da Silva and Andrade Gutierrez executive, Flavio David Barra
  • 30th July 2015, Operation Lava Jato completes 500 days with the recovery of R$870 million
  • The Brazilian Supreme Court has authorised the investigation of nearly 50 current and former legislators, including the former President Luiz Inacio Lula da Silva (Lula)
  • 3rd August 2015, Former minister Jose Dirceu, his brother and six others are arrested. The former minister is suspected of committing crimes such as corruption, money laundering and gang formation. He is suspected of receiving bribe money from Petrobras contracts through his company JD Consultoria
  • 4th August 2015, Milton Pascowitch states that R$532.8 thousand paid to PT originated from the Belo Monte Power Plant works. The value, he says, was paid by Engevix and was passed on to him by former PT treasurer Joao Vaccari Neto in 2011
  • 5th August 2015, Former president and current Senator Fernando Collor de Mello was charged with corruption as he received R$26 million of bribes from 2010-2014 for contracts signed by BR Distribuidora
  • 13th August 2015, former city councilor Alexandre Oliveira Correa Romano is arrested.
  • 17th August 2015, the former director of the international area of Petrobras Nestor Cervero, lobbyist Fernando Baiano and Julio Camargo, a former consultant to Toyo Setal are convicted for corruption and money laundering
  • 4th September 2015, Former Minister Jose Dirceu and 16 others are charged with crimes such as criminal organization, corruption and money laundering
  • 11th September 2015, The Federal Police requests authorization from the Federal Supreme Court to take testimony from former President Luiz Inacio Lula da Silva, suspected of having benefited from a corruption scheme
  • 15th September 2015, Former minister Jose Dirceu, PT’s former treasurer Joao Vaccari Neto and 13 others are convicted of corruption and other crimes
  • 21st September 2015, PT’s former treasurer Joao Vaccari Neto, the former director of Petrobras Renato Duque and eight other people are convicted for crimes such as corruption and money laundering
  • 22nd September 2015, former federal deputy Andre Vargas, his brother Leon Vargas and the publicist Ricardo Hoffmann are convicted
  • 29th October 2015, former deputy Pedro Correa is sentenced by the Federal Justice of Paraná for corruption and money laundering crimes to 20 years and 7 months in prison
  • 16th November 2015, Roberto Goncalves, former executive manager of Petrobras, and Financial Operator Nelson Martins Ribeiro, are temporarily detained on suspicion of involvement in the criminal scheme of fraud, corruption and money evasion
  • 16th November 2015, former federal deputy Luiz Argolo is convicted for passive corruption and money laundering
  • 24th November 2015, the lobbyist and bailiff Fernando Baiano stated in testimony that he transferred $2 million to Bumlai regarding a commission that the cattle dealer would be entitled to for allegedly requesting Lula’s intermediation in a negotiation for a contract. The money would be used to pay a real estate debt of a daughter-in-law of Lula
  • 25th November 2015, Senator Delcidio do Amaral (PT), a government leader in the Senate, is arrested by the Federal Police for trying to disrupt Lava Jato’s findings
  • 18th January 2016, former director of Petrobras Renato Duque is charged for crimes of currency evasion and money laundering
  • 19th February 2016, Senator Delcidio do Amaral (PT) leaves the prison after 87 days
  • 4th March 2016, Authorities investigate the relationship of former President Luiz Inacio Lula da Silva and his relatives with contractors involved in Petrobras’ corruption scheme
  • 21st March 2016, financial operator Raul Schmidt Felipe Junior, who had been on the run since July 2015, is held in custody in Lisbon at Lava Jato’s first international operation
  • 23rd March 2016, The Federal Police indict PT marketer Joao Santana, his wife, Monica Moura, and six others
  • 1st April 2016, Silvio Pereira, former secretary general of PT, and Ronan Maria Pinto, owner of the newspaper Diario do Grande ABC, are arrested
  • 12th April 2016, former Senator Gim Argello is arrested. The Federal Public Prosecutor’s Office says there is evidence that the former senator asked for $5 million in bribes from the contractor UTC Engenharia and $350,000 from OAS
  • 28th April 2016, The Comptroller General of the Union declares that construction company Mendes Junior as unfit, and the company is prohibited from public contracts for two years
  • 5th May 2016, the federal Court agrees a leniency agreement between Andrade Gutierrez and the Public Ministry, on provision of evidence and payment of R$1 billion
  • 23rd May 2016, ex-treasurer of the PP Joao Claudio Genu is arrested in Brasilia
  • 23rd June 2016, Former Minister of Planning under Lula and Communications in the first Dilma government, Paulo Bernardo, is arrested
  • 1st July 2016, Lucio Funaro is arrested in São Paulo. The Federal police also perform search and seizure warrants in the companies of the JBS Friboi group
  • 6th July 2016, former CEO of Eletronuclear Othon Luiz Pinheiro da Silva is arrested by Federal police
  • 2nd August 2016, former president of the construction company Ildefonso Colares Filho and the former director Othon Zanoide de Moraes Filho are arrrested
  • 8 March 2016, Marcelo Odebrecht, CEO of Odebrecht, is sentenced to 19 years in prison, after being convicted of paying more than $30 million in bribes to Petrobras executives
  • 10th August 2016, Samir Assad is arrested
  • 22nd September 2016, Former Finance Minister Guido Mantega is arrested in Sao Paulo, but his arrest is revoked on the same day
  • 26th September 2016, Former Minister Antonio Palocci is arrested in Sao Paulo. It had been testified by Petrobras Supply Director that Alberto Youssef had asked him for $2 million of PP’s quota for the presidential campaign of former President Dilma Rousseff. The request would have been made on request of Palocci
  • 17th November 2016, former governor of Rio de Janeiro Sergio Cabral is suspected of receiving millions in bribes to close public contracts. The estimated loss on works is over R$220 million
  • 16th December 2016, Former Rio de Janeiro governor Sergio Cabral (PMDB), a woman and five other people are denounced for involvement in the payment for unfair advantages from the Petrobras contract of Consorcio Terraplanagem Comperj, formed by Andrade Gutierrez, Odebrecht and Queiroz
  • 30th January 2017, The President of the Supreme Court (STF), Minister Carmen Lucia, endorses the 77 charges against executives and former executives of the construction company Odebrecht
  • 2nd February 2017, trafficker Joao Santana, his wife and four other defendants are convicted
  • 10th February 2017, former governor of Rio de Janeiro Sergio Cabral, businessman Eike Batista and seven other people are accused
  • 14th February 2017, the Federal Court makes former governor or Rio Sergio Cabral Filho defendant for the fourth time. There are 184 money laundering crimes. The former governor, his wife, Adriana Ancelmo, and nine others are accused of money laundering more than $ 39 million in 10 months
  • 14th March 2017, Former President Luiz Inacio Lula da Silva testifies and denies that he acted to obstruct Operation Lava Jato.

Luiz Inacio Lula da Silva caricature14th March 2017, the director of the Rio de Janeiro State Railroad Transport Company (RioTrilhos), Heitor Lopes de Sousa Junior, and the current Undersecretary of Tourism of the state and former Undersecretary of Transport, Luiz Carlos Velloso, are arrested

  • 21st March 2017, 14 search and seizure warrants are undertaken by Federal police in Pernambuco, Alagoas, Brasilia, Bahia and Rio de Janeiro. The warrants are the first on the basis of the award-winning Odebrecht contractor and are targeted at Senators Renan Calheiros, Eunicio Oliveira, Valdir Raupp and Humberto Costa

http://especiais.g1.globo.com/politica/2015/lava-jato/linha-do-tempo-da-lava-jato/

Brazilian President Dilma Rousseff, who was chairman of the Petrobras Board from 2003-2010 has denied knowledge of any wrongdoing.

Dilma Rousseff caricatureThe scandal has had a significant impact on Petrobras. Petrobras delayed reporting of financial results in 2014 and in April 2015 announced that it had written down almost $17 billion due to overvalued assets. Petrobras was forced to announce it would sell $13.7 billion in assets and cut capital expenditure.

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