By Samuel Rubenfeld, Paul Kiernan and Luciana Magalhaes 

Brazilian construction giant Odebrecht SA signed the largest anticorruption settlement in history Wednesday with authorities on three continents, following a two-year investigation that landed its chief executive and dozens of other powerful figures in prison.

Odebrecht, Latin America's top construction firm, agreed to pay between $2.6 billion and $4.5 billion to authorities in Brazil, the U.S. and Switzerland, according to the U.S. Department of Justice, which had brought suit against the firm under the Foreign Corrupt Practices Act.

The closely held firm admitted to violating foreign bribery laws and agreed to a compliance-monitoring program under the supervision of Brazilian prosecutors.

The deal represents a landmark in Brazil's so-called Operation Car Wash, which has unearthed what is widely seen as the most sprawling graft scheme ever exposed and triggered a political crisis that led to the impeachment of President Dilma Rousseff.

Odebrecht has been cut off from public contracts for the better part of two years, sending its credit ratings into a downward spiral and exacerbating Brazil's worst economic downturn in modern history.

Brazilian prosecutors say Odebrecht was the ringleader in a cartel of construction firms that conspired to overbill state oil company Petróleo Brasileiro SA for contracts, paying bribes to high-level Brazilian politicians and Petrobras executives along the way.

But the corruption went well beyond Petrobras and even Brazil. Over the course of 15 years, Odebrecht paid nearly $800 million in bribes related to more than 100 projects in 12 countries, including Angola, Venezuela and Mexico, according to U.S. court documents. It received $3.34 billion in ill-gotten "benefits" from the myriad bribery schemes, the U.S. Department of Justice said Wednesday.

Odebrecht doesn't dispute any of the allegations and says it is cooperating with authorities.

Police arrested the grandson of the firm's founder, former Chief Executive Marcelo Odebrecht, in June 2015. Mr. Odebrecht was sentenced in March to 19 years in prison.

The company began negotiating with prosecutors in February. The company's revenue fell to $39.1 billion last year from $45.8 billion in 2014, and its number of employees from 170,000 to 128,000. Revenue likely fell further this year, although the company hasn't disclosed those figures.

As part of the settlement, Odebrecht reached a leniency agreement with Brazilian authorities that will allow the firm to once again bid on government contracts, removing a major source of uncertainty for the company and its creditors.

"While the main goal is to uncover illicit conduct ..., the leniency deal also allows the signing companies ... to clean up their liabilities and recover their ability to invest," said Deltan Dallagnol, the head of the Car Wash task force at Brazil's federal prosecutors' office.

Odebrecht's 2025 notes were trading Wednesday at 58.5 cents on the dollar, up from a low of 25.5 cents in May.

In addition to Odebrecht's settlement, the company's petrochemicals subsidiary, Braskem SA, agreed to pay $957 million for bribing Petrobras officials to obtain cut-rate raw materials, Brazilian prosecutors said.

Whether Odebrecht is subject to the maximum penalty of $4.5 billion depends on its ability to pay, which will be assessed in coming months, the Justice Department said. The company will pay the fine over 23 years, Brazilian prosecutors say.

But even the minimum payout would dwarf the $1.6 billion paid by German industrial conglomerate Siemens AG as part of a deal with German and U.S. prosecutors in 2008. That had previously been the world's largest anticorruption settlement.

Mr. Odebrecht and his grandfather's company steadfastly maintained their innocence for more than a year. Meanwhile, Mr. Dallagnol's team of prosecutors engaged in plea bargaining -- until recently a rarely used tactic in Brazil's legal system -- to extract testimony and evidence against the company from dozens of suspects.

Odebrecht sought and utilized smaller banks in countries with strict secrecy laws to help carry out the scheme, paying extra fees, higher rates and a percentage of each illicit transaction to certain executives to ensure their cooperation, according to court documents filed by the Justice Department and made public Wednesday.

In one case in Antigua, Odebrecht bought the local branch of a bank, allowing other members of the conspiracy, including politicians from multiple countries, to open accounts and receive transfers without arousing attention.

Odebrecht also created a stand-alone internal division that "effectively functioned as a bribe department," the documents said. Dubbed the "Division of Structured Operations," the department used an off-the-book communications system that allowed Odebrecht employees to communicate with each other and with outside financial operators and co-conspirators through secure emails and instant messages using code names and passwords, the documents said.

As the Brazilian prosecutors began unraveling the scheme, Odebrecht sought to "conceal or destroy evidence" and sent out directives to employees to "delete records that might reveal illegal activities," U.S. attorneys alleged, according to court documents.

The Justice Department said Odebrecht had terminated and disciplined the employees involved the misconduct and adopted heightened controls and anticorruption compliance protocols.

"When you have bribery at that level, that goes all the way up to the CEO, and when you have a department that systematically pays out hundreds of millions of dollars, that's when you get the largest fines," said Tom Fox, a Houston-based lawyer and consultant who follows the Foreign Corrupt Practices Act.

Earlier this month, Odebrecht issued a mea culpa, apologizing for its "illicit actions."

"Odebrecht has learned from these mistakes and is evolving," the statement said.

Mr. Fox said Wednesday's settlement is likely to raise pressure on the dozens of other companies that did business with Petrobras and Odebrecht to investigate their own dealings.

"Eventually the government is going to go down the chain," he said.

Corrections & Amplifications: Braskem SA, a Brazilian chemical company controlled by Petrobras and Odebrecht, will pay approximately $957 million in fines, in addition to the fines paid by Odebrecht. A previous version of this story said part of the $2.5 billion fine will be paid by Braskem. (12/21)

Write to Luciana Magalhaes at Luciana.Magalhaes@wsj.com

 

(END) Dow Jones Newswires

December 22, 2016 02:47 ET (07:47 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
PETROBRAS PN (BOV:PETR4)
Historical Stock Chart
From Feb 2024 to Mar 2024 Click Here for more PETROBRAS PN Charts.
PETROBRAS PN (BOV:PETR4)
Historical Stock Chart
From Mar 2023 to Mar 2024 Click Here for more PETROBRAS PN Charts.