The Betrayal of Brazil – by Michael Smith, Sabrina Valle and Blake Schmidt(Bloomberg News – May 8, 2015)

http://www.bloomberg.com/

As a massive corruption scandal unfolds, Brazilians are facing some stark truths: The powerful and connected are still dividing the country’s riches among themselves. The past decade’s economic miracle was in large part a mirage. And the future is again on hold.

In mid-2013, Brazilian federal police investigator Erika Mialik Marena noticed something strange.

Alberto Youssef, suspected of running an illicit black-market bank for the rich, had paid 250,000 reais (about $125,000 at the time) for a Land Rover. The black Evoque SUV ended up as a gift for Paulo Roberto Costa, formerly a division manager at Brazil’s national oil company, Petrobras. “We were investigating a money-laundering case, and Petrobras wasn’t our target at all,” says Marena. “Paulo was just another client of his. So we started to ask, ‘Why is he getting an expensive car from a money launderer? Who is that guy?’”

Marena had spent the previous decade building cases against money launderers, and Youssef had been a perennial target. He’d been arrested at least nine times for using private jets, armored cars, clandestine pickups by bagmen, and a web of front companies to move illicit cash. But Youssef had been spared serious jail time by testifying repeatedly against other doleiros, Brazilian slang for specialists in laundering unreported cash.

The Petrobras connection suggested Youssef was into something bigger. Marena and her partner, investigator Márcio Anselmo, dug into Costa from offices in the modern glass-and-concrete federal police headquarters in the city of Curitiba, 400 kilometers (250 miles) south of São Paulo. A dozen more investigators and prosecutors joined, and the case grew so big that Brazil’s attorney general set up a task force in temporary office space across town.

By March 2014, federal judge Sérgio Moro had begun rounding up dozens of suspects. (In Brazil’s justice system, a judge formally charges a defendant, approves major steps in the investigation by police and prosecutors, hears the evidence, and then decides whether the defendant is guilty or innocent.)

They were accused in Moro’s court of participating in a bid-rigging scheme of astounding proportions. For years, prosecutors have alleged in Moro’s court, a cartel of Brazil’s biggest and richest builders fixed a vast swath of the world’s seventh-biggest economy, subverting competition in the oil industry and, possibly, the huge public works programs that drive growth and employment.

Brazilians are riveted by the scandal, nicknamed Operation Carwash because some funds were laundered through a service station. Moro has ordered more than a dozen dragnets so far, and the arrests of executives, bankers, politicians, and bagmen, marching some to jail past a phalanx of television cameras. One suspect took his private jet to Curitiba to turn himself in. Another spent his last hours of freedom in a hotel suite on Rio de Janeiro’s fabled Ipanema beach to avoid being taken from his home handcuffed.

The arrested shared four holding cells in Curitiba police headquarters with unenclosed communal toilets. Some slept on mattresses strewn on the bare floor. A dozen have confessed to making or accepting payoffs and rigging contracts, some in videotaped testimony that is posted online.

One former Petrobras manager, Pedro Barusco, described taking almost $100 million in bribes; he’s since returned most of the money in a bid for leniency.

For the rest of this article, click here: http://www.bloomberg.com/news/features/2015-05-08/brazil-s-massive-corruption-scandal-has-bitterness-replacing-hope

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