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Brazil Petrobas corruption scandal: warrant issued against Workers’ Party treasurer

The warrants were issued on Thursday morning, according to a statement published on the website of the Federal Police.

By: Associated Press | Sao Paulo/ Rio De Janerio |
February 5, 2015 7:52:12 pm


A warrant against the treasurer of Brazil’s ruling Workers’ Party is one of 62 arrest and search orders issued by police as part of the investigation into a massive kickback scheme at the state-run oil company Petrobras.

The warrants were issued on Thursday morning, according to a statement published on the website of the Federal Police.

Workers’ Party treasurer Joao Vaccari Neto is being ordered to testify about his knowledge of the scheme. The treasurer was among those implicated by a former Petrobras director who was arrested last year.

Brazilian prosecutors say the kickback scheme involved at least $800 million in bribes and other illegal funds. Some of that money was funneled to the campaign funds of the Workers’ Party and its allies, often disguised as legal corporate donations.

On Wednesday embattled Brazilian oil company Petrobras said that the company’s chief executive officer and five other top figures stepped down amid a long-running and massive kickback scandal at the firm.

Government-run Petrobras said in a one-line statement on its website that CEO Maria das Gracas Foster and five other executive directors were out. None of the top officials are facing charges of wrongdoing, but prosecutors have said the investigation is still in its early stages.

For months there have been loud calls from business and political circles for a shakeup of Petrobras’ top executives. Even before the scandal broke early last year, the company was saddled with massive debt and was not making good on its potential in developing Brazil’s massive offshore oil fields that could hold upward of 100 billion barrels.

Petrobras has lost billions in market value as daily reports broke news about the extent of the alleged corruption scheme. Prosecutors say hundreds of millions in bribes were paid by construction and engineering firms in return for inflated contracts worth billions.

Petrobras has seen its debt downgraded by both Moody’s and Fitch in the past week, further choking its ability to borrow on international markets.

The oil firm is Brazil’s biggest company and is charged with tapping massive offshore oil fields and creating wealth that leaders hope will propel the country to developed world status. But the debt-plagued firm hasn’t met development goals, and the riches remain buried deep under the sea.

“This whole scandal at Petrobras is a disaster for Brazil,” said Carlos Pereira, a political analyst at the Getulio Vargas think tank in Rio. “A company that was a national symbol is today facing a melancholic situation.”

The scandal and Foster’s resignation, he said, “reveal the enormous incompetence of the government to deal with the company which fell victim to a criminal group of politicians” who stole millions from Petrobras.

“A political elite destroyed the company,” he said.

Rousseff had yet to comment on Foster’s resignation on Wednesday afternoon.

Brazilian prosecutors have said the kickback scheme involved at least $800 million in bribes and other illegal funds. They expect that figure to grow as they keep investigating. Some of that money was funneled back to the ruling Workers’ Party and its allies campaign coffers, often as legal corporate donations.

Federal prosecutors said they’ve recovered about $170 million involved in the scheme, that over 230 businesses of all sizes are being investigated and that 86 people are facing charges so far, including several top executives from Brazil’s main construction and engineering firms who have been jailed.

Additionally, federal prosecutors are expected to announce charges this month against dozens of politicians, mostly congressmen, in connection to the case.

Speculation has been rife that Foster, 61, would be fired, but her friend and ally Brazilian President Dilma Rousseff sharply defended her record of over three decades in the company.

The pressure from political and business circles to find new leadership at Petrobras increased last week after the company belatedly released an unaudited earnings report that didn’t include an estimate on losses due to corruption.

Foster then told reporters two days after the earnings report was released that losses on the books due to inflated contracts could be over $30 billion — a preliminary calculation that reportedly infuriated Rousseff.

Rousseff, a former energy minister and presidential chief of staff who herself served as chair of the Petrobras board for seven years through 2010, is widely seen as wanting a replacement from outside the company, but the ongoing scandal is thought to be making the top position a hard sell to prospective candidates.

According to the Folha de S.Paulo daily, which first broke the news Tuesday of Foster’s imminent departure, Rousseff’s predecessor and influential mentor, Luiz Inacio Lula da Silva, has suggested two possible replacements for Foster: the former head of Brazil’s Central Bank, Henrique Meirelles; and the CEO of mining giant Vale, Murilo Ferreira.

In a research note late Tuesday, the U.S.-based Eurasia Group wrote that “we expect whoever to come on board to have strong market credentials.”

“The presidential palace has for some time viewed Petrobras’s corruption scandal as a macro risk to growth, and as such, a premium will be placed on nominating a CEO and board members that generate a credibility punch,” the note added.

Fabio Fuzetti, a Sao Paulo-based oil analyst for Antares Capital Management, said Wednesday’s decision was inevitable but a little too late.

“Petrobras is in an unsustainable position,” he said. “They have to start to turn things around in a very significant way. It’s performing in a very worrisome way. Petrobras is in dangerous levels of debt.”

Shares of Petrobras soared 15 percent on Tuesday amid rumors that Foster was on her way out. Shares were down 1.5 percent at midday Wednesday as investors took profits.

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