By Will Connors, Rogerio Jelymayer and Paul Kiernan
SÃO PAULO--Brazilian authorities on Friday arrested the heads of
two Latin American construction giants, alleging the companies
helped to mastermind a cartel that stole billions of dollars from
state-run oil company Petróleo Brasileiro SA and paid kickbacks to
corrupt politicians.
The arrests are an exclamation point to a wide-ranging
corruption probe that has rocked Brazil's business and political
establishment for more than a year, now ensnaring the chiefs of
Odebrecht SA and Andrade Gutierrez, who stand accused of money
laundering and corruption.
Odebrecht is Latin America's largest construction conglomerate,
with business in the U.S., Europe and Africa, and whose billionaire
head, Marcelo Odebrecht, is a household name in Brazil. Andrade
Gutierrez has business in 40 countries. The companies, both
privately held, are deeply involved in the development of stadiums
and infrastructure for the 2016 Olympics in Brazil.
The scandal has crippled Brazil's most important company,
Petrobras, damaged the nation's economy and threatens to engulf the
administration of President Dilma Rousseff. But it has also spurred
Brazil's law-enforcement and judicial organs to emerge as
independent institutions in a nation where the rich and powerful
have long escaped punishment.
"The Brazilian authorities today have made tremendous advances
in the fight against corruption," said Fernando de Magalhaes
Furlan, a partner at the consultancy Furlan Associados who formerly
led Brazil's antitrust agency. "Ten years ago it was unthinkable to
see someone of this magnitude go to jail. But now you can say that
no one is safe."
Mr. Odebrecht's arrest, in particular, is a major step in an
investigation that has already ensnared several former Petrobras
executives and damaged the credibility of the ruling Workers'
Party, under whose watch the alleged crimes were committed for at
least a 10-year period until 2014, prosecutors say.
Friday's developments also bring the alleged corruption scheme a
step closer to President Dilma Rousseff's mentor, former President
Luiz Inácio Lula da Silva. Last month Brazilian prosecutors opened
a preliminary investigation into Mr. da Silva for "influence
peddling," a crime in Brazil, in which he allegedly helped
Odebrecht win contracts in Cuba and Angola, among other countries,
between 2011 and 2014. Odebrecht also has contributed to a
foundation that Mr. da Silva runs and paid him several times to
give speeches at events abroad.
Representatives for Messrs.. Gutierrez and Azevedo, who haven't
been charged, couldn't be reached for comment.
Neither Ms. Rousseff nor Mr. da Silva have been accused of
wrongdoing in the Petrobras case. A Rousseff spokeswoman declined
to comment. A da Silva spokesman said he makes appearances for many
companies from different sectors, including Odebrecht, and said
that those appearances are public and well-known. Both Ms. Rousseff
and Mr. da Silva have previously denied any involvement in the
alleged scheme. The Workers' Party didn't respond to a request for
comment.
Odebrecht said that its offices in São Paulo and Rio de Janeiro
were searched by police, but it didn't confirm the arrests. The
company said that the police operation was unnecessary, since the
company was cooperating with the investigation. Odebrecht officials
have previously denied any involvement in the alleged scheme.
Andrade Gutierrez reiterated on Friday that it denies any
involvement in the alleged corruption scheme and said it was
cooperating with the investigation.
Petrobras has said it is a victim of the alleged scheme and that
it is cooperating with investigators.
"We have no doubt that Odebrecht and Andrade Gutierrez headed
the cartel scheme within Petrobras," said Brazilian federal
prosecutor Carlos Fernando dos Santos Lima at a news conference in
the southern Brazilian city of Curitiba. The companies "cannot pass
themselves off as innocent given how much evidence we have."
The arrests are part of "Operation Car Wash," in which
Petrobras, along with Brazil's biggest construction firms and about
50 current and former politicians are alleged to have participated
in a yearslong bribery scheme.
Investigators accuse construction executives and Petrobras
officials of inflating the price of contracts and sharing some of
the ill-gotten gains with lawmakers and political parties.
Prosecutors said in May that the total estimated amount alleged
to have been paid in bribes was $2 billion.
Odebrecht's parent company, which oversees units involved in
everything from oil and gas exploration to defense contracting to
shipbuilding, had 2014 revenues of $45 billion.
With a presence in 21 countries, Odebrecht has footprints across
Latin America, Africa, and the U.S., and is a major political donor
in Brazil. In 2014 the company gave at least 5.3 million reais
(about $1.7 million) Ms. Rousseff's re-election campaign and the
Workers' Party, according to Brazil's Superior Electoral Court.
The company's Odebrecht USA unit has established deep roots in
the southern U.S. and won dozens of government contracts. The
company has built or is building an expansion of Miami
International Airport; the American Airlines Arena, where the Miami
Heat basketball team plays; the new Miami port; and highway
projects in Texas and Louisiana.
Odebrecht USA, like its parent company in Brazil, has been
politically active in Florida. The company gave $15,000 as of
February to the re-election campaign of Miami Mayor Carlos Gimenez,
according to campaign finance disclosures. The chief executive of
Odebrecht USA, Gilberto Neves, is on the board of several local
community groups.
While Odebrecht and Andrade Gutierrez had been mentioned in the
investigation, the arrests of their chief executives, Mr. Odebrecht
and Mr. Azevedo, come months after the heads of other construction
companies were nabbed by Brazilian authorities.
"The prosecutors are very careful," said David Fleischer, a
Brasília-based political analyst. "If you're going after big fish
you want to make sure you can take them down."
Mr. Lima, the prosecutor, said executives from the two companies
hadn't been and arrested earlier because the companies "had a more
sophisticated system" for making the alleged bribe payments, using
foreign bank accounts in Switzerland, Monaco and Panama, so it took
longer to prove their case.
Odebrecht and Andrade Gutierrez are also heavily involved in
construction projects for the 2016 Summer Olympics, to be held in
Rio de Janeiro.
Rio's main Olympic Park is being built by a consortium
comprising Odebrecht, Andrade Gutierrez and Rio-based construction
company Carvalho Hosken, which owns vast tracts of land in the
area. The Olympic Athletes' Village, a complex of 31 high-rise
apartment towers, is being built by Odebrecht and Carvalho
Hosken.
Odebrecht is also helping to build a new Metro line for the
Olympics as part of a consortium led by Queiroz Galvão, another
company implicated in the alleged corruption scheme.
Both companies also claimed a large slice of the World Cup pie.
Odebrecht and Andrade Guitierrez either built or helped to build
stadiums in host cities Recife, Rio de Janeiro, São Paulo,
Brasília, Manaus, Salvador, and Porto Alegre, along with several
infrastructure projects.
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