Carwash Operation sets motion in Brazil

Since 2014, Brazil finds itself in the grip of the Petrobras scandal, known locally as operação lava jato or ‘carwash’ operation and rocking the country socially, economically and politically. The operation has been exposing the extent to which the tendrils of corruption have spread through Brazil’s economy.

The operation started as an investigation into money-laundering, but has morphed into a corruption scandal so large that it has shocked Brazilians long accustomed to unlawful acquisition of public money through questionable and improper transactions with public officials in politics. It is estimated that more than $2 billion in bribes were paid out in a scheme centered at state oil company Petrobras and included major construction and public sector related companies. Since the beginning of the investigations, dozens of politicians and top businessmen have been convicted and jailed, and many more are facing charges. 

The investigation’s globalization is the new twist that should mark the case as one of the largest investigation against corruption and transnational money-laundering of the world.

In three years of investigations, the federal public prosecutor’s office has had 159 requests of cooperation with foreigner authorities for criminal inquiries and prosecutions related to the discoveries that shall examine corruption, money-laundering and contractual fraud.

37 countries have signed an umbrella agreement for international legal cooperation with Brazil for exchange of criminal evidence with the Carwash task force. This is a list tending to increase during this year, as a result of Odebrecht’s leniency deal and plea bargain and of United States participation in the investigations. The list of countries include United States, Canada, Panama, Dominican Republic, Guatemala, Uruguay, Turkey, Isle of Man, Andorra, Germany, Denmark, Switzerland, Sweden, Russia, Macau, China, Singapore, Hong Kong, among others. 

The legal agreements – based in international treaties and conventions – aim for the authorities of a country to request hearings of other countries’ witnesses or investigated individuals/companies, to produce and share documentation evidences, to break bank, phone and e-mail secrecy, to block property and assets and for arrest and extradition. 

The agreements can be active or passive, and Brazil can be either demanded to produce and send evidences for the authorities of a foreigner country in international investigations or to demand other countries to produce and send evidences for Brazilian investigations. 

From these agreements were originated the evidences of secret bank accounts owned by the construction giant Odebrecht and the federal deputy Eduardo Cunha in Switzerland, the first country to sign the collaboration agreement with Brazil. As a direct result of the agreements, 550 million of Brazilian Reais (resources deviated from Petrobras) were repatriated to Brazil.

Until now, 17 countries asked the Brazilian authorities for documents in 26 agreements to initiate their own investigations. United States and Switzerland have publicly informed their investigations, and Italy, Denmark, Sweden, Norway and Guatemala have businesses for which evidences were requested to the Brazilian authorities. 

"Ooops! Hang in there as more names are coming up!" says the satirical cartoon referring to the unveiling of several names of different political parties involved in the Petrobras scandal. Source: Informe Baiano.
“Ooops! Hang in there as more names are coming up!” says the satirical cartoon referring to the unveiling of several names of different political parties involved in the Petrobras scandal. Source: Informe Baiano.

The investigation has become so enormous that Brazil has also sent 122 cooperation requests to 33 countries, such as Singapore, Gibraltar, Liechtenstein, Cayman Islands and Uruguay. 

The operation Carwash has presently arrested 22 people (8% of the 260 investigated and denounced). Two weeks ago, the billionaire businessman Eike Batista was arrested in a bribery and corruption probe. Batista, who was once one of the world’s richest man, is now a living proof of how far the investigation and its offshoots have gone. 

In Brazil, the next thrilling event of the investigation is expected to happen soon, as the plea agreements of Odebrecht’s executives shall be publicized. Last December, Odebrecht signed a roughly 6.7 billion Brazilian reais ($1.94 billion) leniency deal while nearly 80 employees of the company signed plea bargains. The long-awaited leniency deal and plea bargains from Latin America’s biggest engineering firm are expected to shake even more Brazil’s political establishment as they could incriminate as many as 200 lawmakers for taking graft money from Odebrecht. 

Under the terms of the signed agreements, the executives – including Marcelo Odebrecht, the jailed former head of Odebrecht Group – will become state witnesses and provide prosecutors with details of bribes paid to executives of Petrobras and other state companies, plus kickbacks to politicians.

Mariana Vicente is a Brazilian tax lawyer with over 10 years of international experience in tax planning and compliance, legal advice and audit in multinational companies in Europe, Asia and the Americas. She has lived in Brazil, Panama, Mexico, United States and Italy, residing in Denmark since 2015.
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