Brazil targets Petrobras contractors as corruption probe expands

Reuters News
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Posted: Dec 03, 2014 4:09 PM

By Brad Haynes

SAO PAULO (Reuters) - Brazil's comptroller general opened cases on Wednesday against eight engineering firms suspected of bribery and fraud in deals with Petrobras, holding them accountable for their role in a widening corruption scandal at the state-run oil company.

If found responsible for the alleged graft scheme, some of Brazil's biggest industrial conglomerates could be blocked for years from taking government contracts, complicating President Dilma Rousseff's push to expand infrastructure investments.

Executives at Camargo Correa, Engevix, Galvao Engenharia, Iesa, Mendes Junior, OAS, Queiroz Galvao and UTC-Constran were arrested last month as police investigated allegations of overcharging the oil company, known formally as Petroleo Brasileiro SA, in return for kickbacks to politicians and executives.

The comptroller general's office said that testimony from the police investigation, along with documents, emails, phone records and wire transfers had provided evidence to open proceedings against the companies.

The case is dominating Brazil's political landscape and overshadowing Rousseff's plans for a second term starting in January. She was chair of Petrobras' board of directors from 2003 to 2010, when many of the alleged bribes and kickbacks happened, but has denied knowledge of or involvement in the corruption scheme.

The scandal has also intensified scrutiny of corporate governance at Petrobras, where some minority shareholders have complained of lax oversight and outsized government influence.

Securities watchdog CVM said on Wednesday that by letting state development bank BNDES and state-led pension funds vote on board members who are supposed to be elected solely by minority investors, Petrobras CFO Almir Barbassa violated private shareholders' rights.

Without admitting to any wrongdoing, Barbassa agreed to pay a fine of 250,000 reais ($98,000), CVM said, while BNDES and its subsidiary BNDESPAR each agreed to pay 500,000 reais.

Petros, the pension fund for Petrobras workers, also faces a fine of 400,000 reais and the CVM said it warned two other pension funds for their conduct.

At a Congressional hearing on Tuesday, a former executive who helped to uncover the bribery and kickbacks said political parties have dominated the appointment of senior management at Petrobras for years, highlighting the need for independent oversight.

While the pension funds holding shares in Petrobras belong to workers at state-run companies, the government holds sway with management appointed by unions with political ties.

($1 = 2.56 Brazilian reais)

(Additional reporting by Aluisio Alves and Caroline Stauffer; editing by Alan Crosby and Christian Plumb)