In this article -- the product of collaboration between IDL-Reporteros, Caretas, and La Prensa in Panama -- investigators analyze how corrupt officials from Brazilian firm Odebrecht S.A. allegedly laundered bribe money as part of the ongoing Petrobras scandal.
Despite the simplicity suggested by its name, money laundering is a crime that has become more sophisticated and complex in recent decades, to the point of overcoming, for quite some time, the best efforts to combat it.
In this age of information-driven journalism, a good hacker is sometimes the best friend of an investigative journalist. On the other side of the spectrum (or rather, of ethics), a good money launderer is the indispensable ally of the corrupt, especially if they are elites.
This article originally appeared in IDL-Reporteros, and was translated, edited for clarity, and reprinted with permission. Its views do not necessarily reflect those of InSight Crime. See Spanish original here.
Therefore, knowledge of money laundering techniques and methods is essential in all major corruption cases. And in the case of the Lava Jato ("Car Wash") scandal, the most significant corruption investigation in the history of Brazil (and, most likely, in Latin America), it is no coincidence the judge in the case, Sergio Moro, is an expert, having authored a book on the subject.
The Three Levels of Laundering
In its 205 pages of carefully organized evidence, the Brazilian Public Ministry's accusations against Odebrecht can also be read as an investigative text on how to discover and decipher a system of bribes designed to be virtually undetectable.
Prosecutors faced the challenge of describing how Odebrecht covertly paid off three top executives of Petrobras for several years: Paulo Roberto Costa, Pedro Barusco, and Renato Duque.
To be effective, bribery should seek to be undetectable and, above all, unprovable. As Brazilian federal investigators discovered, those involved in the Odebrecht case did this via a multi-layered system of international money laundering.
SEE ALSO: Coverage of Money Laundering
According to prosecutors, the first layer was the "use of bank accounts [...] of Constructora Norberto Odebrecht S.A. [...] and of other companies in its business group." Those accounts included those at Swiss bank PKB Privatbank AG, registered in the name of several offshore companies, almost all of which were owned by Odebrecht. Other offshore companies included Smith & Nash Engineering Company INC, Golac Projects, and Arcadex Corp, among others.
The second layer was the use of "linked accounts," also created in the name of offshore companies, as was the case for Constructora Internacional del Sur, an offshore based in Panama (which will be discussed in further detail below).
In the third layer, prosecutors found accounts "whose economic beneficiaries are the corrupt Petrobras agents: Paulo Roberto [Costa], Renato Duque, and Pedro Barusco." These three men used offshore accounts that, in several cases, were based in Panama, but held cash in other accounts in Switzerland or Monaco.
The way in which these three levels interacted was anything but simple, as evidenced by the graphic below.
The arrows show the movement of cash -- almost all in millions -- that Odebrecht companies moved to their offshore accounts. Afterwards, the money was moved to the "linked" accounts, before reaching those belonging to the three corrupt Petrobras officials.
Prosecutors were able to determine with accuracy (and provide evidence in the indictment), that Odebrecht is the final owner of the offshore accounts involved in the first level of laundering. The Petrobras officials -- Costa, Barusco, and Duke -- are the final owners of the offshore accounts at the third level of money laundering.
But what about the second level of money laundering -- the "linked accounts," which do not belong to Odebrecht or to the Petrobras officials, but were the main means of concealing the cash?
This is why it's worth examining the case of Panamanian company Constructora del Sur in detail.
A Builder That Doesn't Build
Several whistleblowers in the Odebrecht case have claimed to have received bribes from Odebrecht via Constructora Internacional del Sur. Odebrecht, in turn, emphatically denied any involvement with Constructora Internacional del Sur, claiming it had never made any payments to anyone from the corporation.
Constructora Internacional del Sur was created by a notary deed on October 11, 2006, in Panama. With a modest capital amount of $10,000, it was structured like a typical offshore account. Less typical, however, was its choice of resident agent: a law firm called PMC International Legal Services.
One of the most notorious members of this firm is Ernesto Chong Coronado, a car racer linked to the so-called king of Colombian Ponzi schemes, David Murcia. When Murcia came under too much pressure in Colombia he moved operations to Panama, where he developed a relationship with Chong Coronado. According to a report by La Prensa de Panamá, PMC was one of two companies that formed more than 200 corporations linked to Murica's pyramid scheme.
In the end, Chong and Murcia ended up quarreling when the former accused the latter of having kept some of his most valuable assets. This included diamonds, a Ferrari, and a Lamborghini (which, amazingly, authorities repainted so that it looked like a Panamanian police car, making it perhaps the most expensive patrol car in the world).
On July 21, 2009, the structure of Constructora Internacional del Sur underwent a fundamental change.
That day, Cecilio Moreno Arosemena appeared before a notary. He was the representative of Constructora Internacional del Sur's new resident agent, Francisco Martinelli -- the beloved cousin of Panama's new president at the time (having taken office in July), Ricardo Martinelli.
Francisco Martinelli was a member of another law firm Patton, Moreno & Asvat, which had become the new resident agent of Constructora Internacional del Sur.
This switch of resident agents brought huge profits to Constructora Internacional del Sur, even though the construction company was not finishing more construction projects. As far as we know, they never placed one brick on top of another.
Nevertheless, in a relatively short period of time -- particularly between the second half of 2009 and 2010 -- Constructora Internacional del Sur received more than $47 million from two offshore companies. According to Brazilian prosecutors, these companies belong to Odebrecht: Smith & Nash Engineering Company Inc., and Golac Projects and Construction Corp.
At the same time, Constructora Internacional del Sur deposited more than $3 million in the European accounts of Panamanian offshore companies, and whose beneficiaries were the corrupt Petrobraus officials: Paulo Roberto Costa, Pedro Barusco, and Renato Duque. Both Costa and Barusco received more than $1 million each, while Barusco received $875,000.
How can Odebrecht now justify its previous emphatic claim to have had no connection with Constructora Internacional del Sur? That is just one of the difficulties its team of lawyers will face.
In Panamanian offshore companies, managers (or "dignitaries") of the company are employees of the law firm, or of the beneficiary of the offshore. They receive a generally modest payment for the use of their name.
Francis "Frankie" Martinelli -- the cousin of the now former Panamanian President Ricardo Martinelli and who acted on behalf of the resident agents of Constructora del Sur -- was fortunate enough to employ Rodny Soto Núñez as his driver. At one point, Rodney Soto charged at least $2.3 million for a private consultancy for a subcontractor of the Panama Metro, which Odebrecht built.
Rodny Soto received the money from another company, Sofratesa, a contractor of the consortium led by Odebrecht. This contract with Sofratesa, for which Soto was so considerably compensated, meant "offering secretarial services and knowledge of the Panamanian market" according to research by La Prensa.
However, $2.3 million does not seem to have changed much in Rodny Soto's life, because when La Prensa of Panama found him, he was working a new job, managing heavy transport. "I wish I had that money," he told the La Prensa reporter.
As Frankie Martinelli and many others like him could explain, part of the so-called charm of offshore accounts is that what is officially charged on paper isn't necessarily what is paid out.
After its feverish activity in secretive banking, Constructora Internacional del Sur was dissolved on August 15, 2014, as the Lava Jato investigation gained momentum. A few days later, Paulo Roberto Costa agreed to become a protected witness.
The paperwork for the official dissolution of Constructora Internacional del Sur states that the company dissolved "given that their objectives had been achieved."
About that there was no doubt.
*This article originally appeared in IDL-Reporteros, and was translated, edited for clarity, and reprinted with permission. Its views do not necessarily reflect those of InSight Crime. See Spanish original here.