Petrobras ‘carwash’ probe to bring $2.5bn bribe fine

Bloomberg

US and Brazilian authorities are set to impose $2.5 billion in foreign-corruption penalties on Odebrecht SA, Latin America’s biggest construction company, and an affiliate for violating anti-bribery laws, people familiar with the discussions said.
Prosecutors say Odebrecht and the affiliate, Braskem SA, paid officials at Petroleo Brasileiro SA, the state-run oil producer known as Petrobras, to win contracts. Odebrecht and Braskem will plead guilty to charges involving the US Foreign Corrupt Practices Act, three people said. A Swiss investigation of Odebrecht is also part of the settlement.
“Odebrecht recognizes it participated in inappropriate practices,” the company said in a written statement on Thursday after a Bloomberg News report that more than 60 company executives were signing plea agreements in the case. “It was a grave mistake, a violation of our principles, an aggression to values of honesty and ethics. We won’t allow it to happen again.” Braskem said that it is in advanced talks with authorities from both the US and Brazil regarding the probe and expects to sign a settlement agreement.
In all, the penalties would set a record for a multi-country corruption settlement. The bulk of the fines will be paid to Brazil by Odebrecht, one of the people said. Braskem is expected to pay about $700 million, the person said. The previous record for anti-bribery penalties was imposed against Siemens AG, which in 2008 paid $800 million to the US for FCPA violations and another $800 million to German authorities.
The fines would be the first corporate penalties in the US to come out of the nearly three-year investigation known as Operation Carwash, which initially focused on illicit payments made to executives at Petrobras. The probe then spread to other industries in Brazil, implicating construction companies, banks, shipyards and leading politicians from several parties.
“This is a first crucial step in a coordinated course of action by the law enforcement authorities in Brazil, the USA and Switzerland,” the Swiss Attorney General’s Office said in an e-mailed statement. It added that it was “pleased to note that a settlement has been reached in Brazil in terms of which the Odebrecht Group acknowledges that there has been misconduct and has undertaken to pay over a billion of dollars in damages.”

JOINT AGREEMENT
The companies have agreed in principle to the settlements, but finalizing the agreements could take some time, people familiar with the matter said. Odebrecht and Braskem are signing a joint leniency agreement that would ease restrictions on their businesses, the people said. Braskem is 38 percent owned by Odebrecht and 36 percent held by Petrobras, according to its website. Marcelo Odebrecht, the grandson of the company’s founder, stepped down as chief executive officer after his arrest last year. He was convicted of 11 counts of active corruption involving $64 million in bribes to Petrobras agents and was sentenced to more than 19 years in jail.
Odebrecht didn’t respond to requests for comment. Braskem and a lawyer for Marcelo Odebrecht declined to comment. A spokesman for the US attorney general’s office didn’t immediately respond to an after-hours inquiry. Judy Burns, a spokeswoman for the US Securities and Exchange Commission, declined to comment.
Operation Carwash, Brazil’s biggest-ever corruption case, originated as a money-laundering probe. Some of the money paid to Petrobras eventually went into funding the country’s political parties, prosecutors have alleged. Insiders at Petrobras and a cartel of contractors allegedly siphoned vast sums from inflated construction and service contracts. Prosecutors at one point detained former President Luiz Inacio Lula da Silva of Brazil for questioning, setting off several days of street protests.

LINK TO OLYMPICS
Investigators probed possible payoffs at projects including two related to the 2016 Olympic Games in Rio de Janeiro, according to court documents. Notes seized from an Odebrecht executive showed a table of payments to more than 200 politicians.
The investigation sent ripples through the country’s construction and energy sectors. Three major builders — OAS SA, Galvao Engenharia and Grupo Schahin — filed for bankruptcy protection for some of their units after the allegations choked off access to bond financing.
Prosecutors in the US and Brazil have been effectively dividing the investigation to suit their respective strengths as they pursue suspected graft related to Petrobras, people familiar with the matter said in May. Brazilian law allows authorities to file criminal graft charges against people but not companies, whereas the US has been more successful pursuing companies accused of corruption.