Published On: June 29, 2015

How the Mighty are Falling to the Judge

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Brasília- DF- Brasil- 07/04/2015-  O juiz federal Sérgio Moro participa de apresentação de um conjunto de medidas contra a impunidade e pela efetividade da Justiça, na sede Associação dos Juízes Federais do Brasil (Fabio Rodrigues Pozzebom/Agência Brasil)

When Sérgio Moro, the federal judge from Curitiba, ordered the detention of two prominent top executives on June 19, he said he was acting to protect Brazil’s economy. Moro said he was trying to stop the spread of an alleged bribe-fueled cartel scheme organized by the companies, which are controlled by some of the country’s richest and most powerful families. His choice: suspend the public contracts of the businesses allegedly involved or jail the top executives running them.

“These companies, given the dimension of billions in net worth, have a relevant role in the Brazilian economy,” Judge Moro said. “It’s even reasonable to debate leniency measures so the companies can survive, to preserve the economy and jobs.” The Olympic Park for the 2016 Summer Olympics in Rio, for example, is being built by a consortium including the Odebrecht and Andrade Gutierrez companies.

The latest arrests have ensnared companies controlled by six of Brazil’s richest families — the Odebrechts, Andrades, Gutierrezs, Camargos, Queiroz Galvãos, and Mata Pires — who together control fortunes valued at more than U$17 billion, according to the Bloomberg Billionaires Index. Salvador-based Odebrecht company alone employs more than 168,000 workers globally, with 106,000 of the jobs in Brazil.

Sérgio Lins de Andrade

Sérgio Lins de Andrade

Sérgio Lins de Andrade, who owns a one-third stake in Andrade Gutierrez, has a fortune worth U$1.7 billion. The company is Brazil’s second-biggest construction company, and partially owns CCR, telecom provider Oi, telemarketer Contax, power company Cemig, and water supplier Sanepar. Otavio Azevedo, who was detained on June 19 along with Marcelo Odebrecht, is Sérgio Andrade’s right-hand man.

Judge Moro denied a request for the arrest of Odebrecht executives in November. However, he said there has since been an accumulation of evidence that shows the CEOs were aware of the decade-long scheme involving hundreds of millions in bribes. He cited an e-mail sent to executives including Marcelo Odebrecht about overpricing of contracts, and a phone call between Azevedo and alleged bribe broker Fernando Soares.

Federal police in Curitiba have published a note they intercepted from Odebrecht to his lawyers asking to destroy email, after he became the highest-profile executive arrested in Brazil’s largest ever corruption investigation. The handwritten note, posted in court documents online, says “destroy email drilling rigs.”

Dora Cavalcanti

Dora Cavalcanti

Dora Cavalcanti, a lawyer for Odebrecht, called the publication of the note “an act of extreme bad faith by the police,” and said there was nothing criminal about its contents or Odebrecht’s intent. “That phrase ‘destroy email’ meant ‘explain’ or ‘refute’ the allegations about the email,” Cavalcanti told Reuters, adding that it was one of seven points in Marcelo Odebrecht’s notes for his plea for habeas corpus, or release from unlawful imprisonment.

The note intercepted by prison guards also mentions “Andre Esteves,” the name of a prominent Brazilian banker. Cavalcanti confirmed Odebrecht was referring to the CEO of Grupo BTG Pactual, in providing context for his defense. Shares in that bank fell nearly 4 percent on Wednesday, June 24, after the note was published.

Marcelo Odebrecht is the head of Brazil’s largest engineering and construction conglomerate, which carries his family name. At 46, he is the third-generation heir to a family construction dynasty with few equals in the developing world. He has not been officially charged, but is being held in “preventive detainment” in prison in Curitiba. Unlike in the US, suspected criminals in Brazil may be legally held in detention for an unlimited period of time before they are officially charged or arrested. During detainment, lawyers for the accused will file a writ of habeus corpus to ask the court to release their client before the client is charged.

Marcelo Odebrecht

Marcelo Odebrecht

“These people thought the police, and justice, would never reach them,” Federal Police agent Erika Marena told Reuters in her office in Curitiba, the center of the Petrobras investigation. Marena said it has been particularly surprising to see some of the executives who are detained struggle with basic daily routines like shaving or laundry because these are activities that have previously been done for them.

Federal prosecutor Carlos Fernando dos Santos Lima said he had “no doubt” that the Odebrecht and Andrade Gutierrez companies led what he called a “cartel” that overcharged Petrobras for contracts and passed on the excess funds to executives and politicians. His investigation turned up an email from an Odebrecht executive that copied in Marcelo Odebrecht and referred to “over-pricing in the operations contract of $20-25,000/day (for drilling rig).”

Odebrecht has placed large newspaper ads saying the term “over-pricing” in the email has “nothing to do with over-billing, overcharging or any irregularity.” Odebrecht lawyer Cavalcanti reiterated that the email was referring to a “cost-plus-fee” pricing arrangement.

Odebrecht construction of Maracanã stadium for 2014 World Cup

Odebrecht construction of Maracanã stadium for 2014 World Cup

The landmark Petrobras investigation “is changing the idea of impunity” said Rodrigo Prando, a sociologist at Mackenzie University in São Paulo. “The United States is used to celebrities being arrested; Brazil has never seen this,” he said.

In a interview given to Reuters news agency on Tuesday, June 23, prosecutor Carlos Fernando dos Santos said the Petrobras investigation is likely to go on for at least two more years and could ensnare more than a dozen foreign companies and the country’s biggest electric utility Eletrobras. The prosecutor also told Reuters his task force is not investigating former President Lula, as some Brazilian media have suggested. “At this point the former president is not part of the investigation,” he said at his office in Curitiba. “The fact is, if we find cause, we will investigate him like anyone else.”

The wealth and status of the executives contrast with the austere style of the federal prosecutors who have spent long hours in cramped offices in the 16 months of the scandal, since an investigation into currency changers at a gas station in Brasília led the prosecutors to a massive kickback scheme. Though they have become local celebrities with frequent television appearances, they laugh when asked about fears for their safety. The federal judge overseeing the case, Sérgio Moro, even rides his bicycle to work on occasion.

Prosecutor Carlos Fernando dos Santos Lima speaks during an interview for Reuters in Curitiba, Brazil, June 23, 2015.  REUTERS/Rodolfo Buhrer

Prosecutor Carlos Fernando dos Santos Lima speaks during an interview for Reuters in Curitiba, Brazil, June 23, 2015. REUTERS/Rodolfo Buhrer

While the court of public opinion is behind the prosecutors, critics accuse them of overreaching with some tactics, including the release of the Odebrecht note. The prosecutors were dealt a setback last month when Brazil’s Supreme Court ordered the release into house arrest of 10 executives who had been in pre-trial detention for five months. At the federal police courthouse in Curitiba, Brazilians have adorned colorful ribbons on the trees and fences in support of the investigation, and while Sérgio Moro tries to avoid the spotlight, he is greeted with cheers and flashing cameras wherever he emerges.

Another detained executive, Ricardo Pessoa, owner of the construction company UTC Engenharia, has acknowledged donating 7.5 million reais (U$2.4 million) from the Petrobras scheme to the campaign that led to President Dilma Rousseff’s re-election last year to a second term, Veja magazine reported on Saturday, June 27. Pessoa also has implicated conservative Senator Fernando Collor, a former president of Brasil, who resigned after two years in office amid a corruption scandal; São Paulo Mayor Fernando Haddad, a member of the PT; and nine other legislators.

Pessoa also has confessed to having donated 2.5 million reais in 2006 to the successful re-election campaign of then-President Lula. Dilma’s Cabinet chief, Aloizio Mercadante, and information minister, Edinho Silva, who was Dilma’s campaign treasurer last year, also were beneficiaries of his donations, Pessoa told investigators. Pessoa also has accused the chairman of the Senate’s Foreign Relations Committee, Aloysio Nunes of the PSDB party, and congressman Julio Delgado of the center-left Brazilian Socialist Party, of accepting his large donations. Pessoa is under house arrest. He was jailed last year and prosecutors say he may have led the cartel. Veja magazine did not say how it obtained the details of his testimony.

Ricardo Pessoa

Ricardo Pessoa

On Monday, June 29, Dilma Rousseff met with the media and business investors in New York before travelling to Washington to meet with President Obama. While in New York, Dilma said: “I do not respect informants because I know, I was jailed in the dictatorship and they tried to turn me into one.” Her remarks were clearly directed at Pessoa and other detained business executives. Many of the key informants in the Petrobras corruption scandal have turned state’s witness after serving lengthy pre-trial jail terms.

Brazil’s prosecutor’s office also said it had asked US law enforcement to help them track the location of Bernardo Freiburghaus, a “delivery man” for Odebrecht. Freiburghaus was hired by Odebrecht to deliver millions of dollars in cash to Petrobras executive Paulo Roberto Costa for at least two years.

Meanwhile, a US court is hearing arguments that Petrobras should stand trial for a culture of bribery and corruption that has devastated Brazilian businesses and political elite and lowered the company’s value by U$90 billion. The Brazilian government owns the majority of Petrobras’ shares, and controls the company with seven of 10 seats on the Board of Directors. If US Judge Rakoff, who is known for his tough stance on corporate wrongdoing, allows the case to go ahead, senior executives and Brazilian politicians could be called to appear before the New York court.

B. Michael Rubin is an American living in Curitiba.

[Research for this article comes from The Guardian, Reuters, and The New York Times]



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