Odebrecht vs Curitiba’s Prosecutors: An End to the Culture of Impunity
While football is often the topic of conversation in Brazil, the reality is people are welcoming an opportunity not to talk about the Petrobras scandal, which has dominated the news for months. However, all the football talk came to a halt on Friday, June 19, when Brazilian federal police in Curitiba arrested one of the country’s richest men, Marcelo Odebrecht.
Now, the country is buzzing again. Why? Because Brazil has a culture of impunity for the wealthy, dating back to the colonial days of land barons, who were known as coronels, (colonels in English). Despite their euphemistic titles, they had no connection to the military, but these men of wealth lived by their own laws.
Sadly, the male arrogance of impunity tied to wealth and power is endemic in Brazil. In a well-known incident a few years ago, Luciana Tamburini, an inspector who works for the transit department in Rio de Janeiro, was working at a roadblock on a Saturday night screening for drunk drivers. Judge João Carlos de Souza Correa, pulled up to the roadblock where Luciana was working. He didn’t appear to be drunk to her, but he was driving without a license, registration, or license plates. When she tried to ticket him for these infractions, he replied with the language of Brazil’s coronels: “Voce sabe com quem está falando?” (Do you know who you’re talking to?)
Most of us would immediately see our dilemma, accept the mistake, apologize to Luciana, and pay the U$100 fine and drive home. But not Judge Souza, who went into a rage, immediately announcing that he was a judge. Luciana told him: “You may be a judge, but you’re not God.” The judge, who is known for his arrogant behavior, demanded Luciana be arrested and handcuffed immediately. When her fellow transit officers refused to obey Judge Souza’s demand, he got on the phone, called some friends in the police department, and had Luciana arrested at the roadblock. When she later appeared in court on the charges, the presiding judge found her guilty of “insulting the dignity of a judge” and fined her the equivalent of three months’ salary. On appeal, Luciana lost again.
Brazil remains today a class-conscious culture where apartment buildings, for example, have two elevators, one labeled “social” and the other “service” – separating the residents from maids or other workers. Until the recent Mensalão trial, it was unheard of for a politician to go to jail. Federal lawmakers in Brazil enjoy job perks that include free housing in Brasília and an unlimited air travel expense account, which elevates their compensation package to far beyond that of Washington’s congressmen.
It is only in the 21st century that Brazil has risen to the level of a world economy and taken on the characteristics of developed countries, exhibiting a dominant middle class and a largely metropolitan population with access to the Internet. Therefore, the image on TV of a wealthy man being arrested is a new experience for Brazilians.
Mr. Odebrecht, the billionaire CEO of the Odebrecht conglomerate, was arrested along with three of his senior company executives. Also arrested was Otavio Marques Azevedo, CEO of Andrade Gutierrez, another major construction conglomerate, plus 11 of his executives. A federal prosecutor accused the men of knowing that their companies paid bribes to politicians that added up to 710 million reais (U$230 million).
“We have material proof that they knew about the practice of over-billing contracts with Petrobras and they participated directly in the division of contracts within the cartel,” a police investigator said in a news conference Friday in Curitiba.
The Odebrecht and Andrade Gutierrez companies are major Petrobras subcontractors and receive a significant portion of their revenue from government contracts. Odebrecht in particular is a linchpin of Brazil’s economy, active in areas including infrastructure, petrochemicals, real estate, agribusiness, and military contracting. The company, which operates in 21 countries, had over U$35 billion in revenue last year.
According to The New York Times: “The Brazilian police called Friday’s wave of arrests ‘Erga Omnes,’ a Latin phrase that means ‘For Everyone.’ It was an apparent message that the country is trying to end its so-called culture of impunity, in which the rich and powerful break the law without fear of punishment.”
The executives were arrested either as a “preventive” or “temporary” measure, according to police, so they may be released soon. However, another wave of executives arrested on similar charges last November in the Petrobras nightmare spent five months in jail before they were released under house arrest. Several companies ensnared by the corruption investigation have already gone bankrupt.
The 46-year-old Marcelo Odebrecht took his family’s engineering conglomerate to places other companies were reluctant to venture like Libya and Cuba. Some of Odebrecht’s biggest projects, like the construction of the port in Mariela, Cuba, were financed with loans from Brazil’s state development bank, BNDES.
Odebrecht has been a staunch backer of ex-President Lula and his successor President Dilma Rousseff, penning unequivocal newspaper editorials like one in April 2013, in which Marcelo said that “Lula did what presidents and ex-presidents from northern hemisphere countries do when they help their national companies grow globally.” Federal prosecutors opened a preliminary inquiry in May into whether Lula used his influence to persuade BNDES to lend Odebrecht money at below-market borrowing costs.
Earlier, in April the federal police arrested four former congressmen in the Petrobras investigation, known as Lava Jato (car wash). They are the first politicians to be arrested in the scandal. The four politicians are accused of being involved with money laundering. Federal prosecutor Deltan Dallagnol said at a televised press conference in Curitiba that he was seeking to restore 6.77 billion reais to taxpayers through fines and the return of stolen funds, when he announced the arrest. The four former congressmen are Andre Vargas, of the ruling Workers’ Party (PT); Luiz Argôlo, of SD; and Pedro Corrêa and Aline Corrêa of PP.
The Supreme Court in Brasília is also currently investigating 34 sitting politicians on suspicion of receiving bribes, but none have yet been formally charged or named. In the coronel tradition, elected officials enjoy special legal protection in Brazil. Brazil’s prosecutors said that they are asking U.S. authorities for help in building their case. The federal prosecutor’s office said in an emailed statement that it was “inspired by the FIFA case.”
In May, Petrobras went to court against contractors and executives to seek repayment of cash stolen in the corruption scheme. Petrobras filed civil lawsuits against construction firm Mendes Júnior, after filing a similar suit in April against Engevix. Petrobras is seeking a total U$452 million.
Petrobras, as well as some federal prosecutors, maintains that the oil company is the victim in the bribery scandal, not the villain. While several former Petrobras executives profited significantly from the bribes, the company has been severely damaged by the scandal, both financially and in its public image. Once a sure bet for stock market investors, the oil monopoly’s market value has nearly evaporated, making it one of the most indebted companies in the world.
Through bribery and inflated contracts, illegal gains were pocketed by several former executives and politicians, leaving the company paying more than it should have for building contracts such as the overpriced U$18 billion refinery in Pernambuco, Lula’s home state, or the purchase of a Pasadena, Texas refinery. The Pernambuco refinery was originally budgeted for U$3.5 billion, and experts say the price Petrobras paid for the Texas refinery was 400 percent more than it was worth. One recently retired Petrobras supervisor noted: “Thanks to the greed, ignorance, and lack of ethics of a handful of men and women, one of the largest and most profitable oil companies in the world has been brought to its knees.” Petrobras stock has begun advancing slowly this year, helped by its large deposits of untapped deepwater oil and gas reserves off the coast of Rio de Janeiro.
[This article is based on research from Reuters and The New York Times.]