HomeNewsBriefBrazil’s Petrobras Scandal Widens with New Wave of Arrests
BRIEF

Brazil’s Petrobras Scandal Widens with New Wave of Arrests

BRAZIL / 19 NOV 2014 BY DAVID GAGNE EN

A former director of Brazil’s state-owned oil company Petrobras has been arrested along with several construction company executives — the latest development in a multi-million dollar money laundering case that has already implicated various members of the country’s political and business elite.

Beginning on November 14, Brazilian federal police arrested a total of 24 people, including Petrobras’ former director of services Renato Duque and various executives of major Brazilian construction companies, in the second phase of an operation known as “Car Wash.” The executives allegedly received billion-dollar contracts from Petrobras in return for inflating the prices of these contracts and sending the oil company financial kickbacks, reported the Associated Press.

According to prosecutors, the kickbacks went to top-level executives within Petrobras as well as high-level politicians, some of them from current President Dilma Rousseff’s Workers’ Party, reported the Wall Street Journal.

One of the construction company executives arrested in the probe subsequently confessed to having paid roughly $1.5 million in bribes to win contracts with Petrobras, reported the Wall Street Journal

The recent arrests are part of an ongoing money laundering scandal that has already implicated Petrobras’ director of refining and supply Paulo Roberto Costa, and several governors and senators. The investigation began over the 2012 purchase of an oil refinery in Texas, for which Petrobras employees are thought to have paid many times the value and then laundered some of the funds earmarked for the purchase in offshore bank accounts.  

InSight Crime Analysis

While this is certainly not the first case of corruption occurring in a state-owned oil company in Latin America, the apparent widespread inolvement of the political and business elite in the alleged massive money laundering scheme may make the Petrobras scandal unprecedented.

The scandal will likely have serious economic and political implications in Brazil. As noted by the Wall Street Journal, it could weaken the mandate for recently re-elected President Rousseff, who served as chairwoman for the oil company from 2003-2010. Meanwhile, Petrobras shares have dropped roughly 30 percent since the beginning of October, according to the Wall Street Journal. On November 16, President Rousseff said Operation Car Wash “may change the country forever.”

SEE ALSO:Brazil News and Profiles

The case has also now attracted unwanted attention from foreign authorities, with the US Security and Exchanges Commission reportedly investigating Petrobras for possible violations of the Foreign Corrupt Practices Act. 

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