Brasilia: At Latin America’s biggest construction company, bribing government officials around the world became so common that a division was created devoted to tracking and facilitating kickbacks.
When wire transfers were inconvenient, workers in this division at Odebrecht of Brazil would organise deliveries of cash-stuffed suitcases to secret locations.
The scheme lasted more than two decades and involved bribes to government officials in a dozen countries across three continents, but eventually it came undone. On Wednesday, Odebrecht and its affiliated petrochemical firm, Braskem, pleaded guilty in US District Court in Brooklyn, New York, to charges that they paid hundreds of millions of dollars in bribes. Together the companies will pay at least $3.5 billion in penalties in a case brought by authorities in the United States, Brazil and Switzerland.
It is the biggest penalty for a violation of the Foreign Corrupt Practices Act of 1977, surpassing a $800 million (Dh2.93 billion) penalty paid by Siemens in 2008 to authorities in the United States. US officials said Wednesday that their investigation was continuing and that individuals could also be prosecuted.
The colony followed a broad investigation in Brazil into corruption at Petrobras, the state-owned oil company, that plunged the country into political crisis and spurred protests that led to the ouster of President Dilma Rousseff. While not implicated — Rousseff was convicted by Brazil’s senate in a separate matter — the plunge in popular support paved the way for her impeachment in August.
Odebrecht, which built the Miami International Airport and has operations in 27 countries including the United States, China and Venezuela, has been accused of colluding with Petrobras executives and other contractors as well as Braskem to take more than $1 billion in kickbacks from the oil company. Under the terms of the agreement with prosecutors, Odebrecht has said it will pay $2.6 billion, while Braskem has agreed to pay $957 million.
The Brazilian investigation into Petrobras, called “Operation Carwash,” a reference to a service station that laundered money, has shaken the political establishment to the core. The authorities there have secured 112 convictions of 83 people ensnared in the investigation, including executives of Odebrecht. The scandal has left Brazil’s oil industry bereft of investment during the country’s worst economic crisis in decades.
“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit — a ‘Department of Bribery,’ so to speak — that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents,” said Sung-Hee Suh, the deputy assistant attorney general of the criminal division of the US Justice Department.
“Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that,” Suh said.
Odebrecht published a statement December 1 apologising for its “participation in illicit activities.” William Burck, a lawyer who represents Odebrecht at Quinn Emanuel Urquhart & Sullivan, Wednesday said: “Odebrecht has cooperated fully and will continue to do so. The company is glad to be turning the page and focusing on its future.”
Odebrecht’s power has reached across political ideologies in Brazil and beyond the country as it made an aggressive push in Latin America and Africa.
“Everyone is involved,” said Gil Castello Branco, founder of Contas Abertas, a transparency watchdog in Brazil. Branco added that even in the huge “Operating Carwash” scheme that has touched so many business executives and politicians, Odebrecht’s actions stand out.
“Odebrecht’s behaviour is without precedent” in Brazil, said Branco. “I’ve never heard of anything even close.”
Braskem, which is controlled by Odebrecht, also used Odebrecht’s bribery division to pay $250 million to politicians, government officials, and an official at Petrobras, according to a civil order filed by the Securities and Exchange Commission on Wednesday. In exchange, officials intervened on behalf of the company on several occasions. In one instance, officials influenced Petrobras to ensure more favourable pricing on its supply of a crude oil by-product that Braskem used for its petrochemical production. In exchange for this intervention, Braskem paid more than $20 million in bribes, the SEC said.
Government officials were also bribed to pass a law allowing a tax credit for the purchase of that crude by-product and other raw materials.
Braskem, in a filing Wednesday with Brazil’s securities regulator, acknowledged it had completed an agreement with authorities and had “concluded the last stage of the global colony negotiations.”
It also said that under the terms of the agreement, the company “will continue to cooperate with the competent authorities and improve its governance and anti-corruption compliance practices.” It noted that it will be subject to external monitoring for about three years.
US authorities said Wednesday that Odebrecht had agreed to pay a $4.5 billion penalty but said it could only pay $2.6 billion. The final amount will be decided at a hearing on April 17.