Brazil's Odebrecht, Braskem pay record fine in bribery case

Yahoo – AFP, Heather Scott, with Sebastian Smith in Rio de Janeiro, December 22, 2016

Brazilian construction company Odebrecht pled guilty to paying hundreds of
millions to bribe government officials in countries on three continents (AFP
Photo/YASUYOSHI CHIBA)

Washington (AFP) - Scandal-plagued Brazilian construction giant Odebrecht and petrochemical affiliate Braskem have agreed to pay a record $3.5 billion to settle a vast international bribery case, US officials said.

Odebrecht, a key player in the Petrobras corruption scandal gripping Brazil, agreed to a fine of $4.5 billion but said it was only able to pay $2.6 billion, the US Justice Department said in a statement. Braskem, meanwhile, will pay $957 million.

The fines are to be paid to Brazilian, Swiss and US authorities, the department said, calling it "the largest-ever global foreign bribery resolution."

It is the latest in a string of terrible headlines for Odebrecht, which Brazilian investigators say was one of the ringleaders of a scheme to plunder billions of dollars from state oil company Petrobras.

Revelation of the scandal has rocked Brazil's political and business establishment to its foundations, with ex-president Luiz Inacio Lula da Silva facing trial and current President Michel Temer reportedly under suspicion.

The bribery case settled Wednesday includes the Petrobras allegations, but is even bigger.

The Odebrecht conglomerate pleaded guilty to bribing government officials and political parties to the tune of $788 million to secure business on three continents -- mostly in Brazil, but also 11 other countries in Latin America and Africa.

"Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit -- a 'Department of Bribery,' so to speak -- that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents," US Deputy Assistant Attorney General Sung-Hee Suh said in a statement.

"Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that."

Political fallout

In the main scheme, Odebrecht targeted top Brazilian politicians and executives at Petrobras for more than a decade starting in about 2001. The bribes were used to secure inflated contracts and even get favorable legislation passed in Congress.

Suh praised Brazil's judiciary for tackling the issue head on.

"I cannot praise their efforts enough. They have been under enormous pressure, done an extraordinary job of initiating the investigation and carrying it through," she said.

The Brazilian probe, known by its codename Operation Carwash, has cast dark shadows over two of Brazil's most important companies, Petrobras and Odebrecht, adding to economic pain as the country flounders in deep recession.

Odebrecht's jailed boss Marcelo Odebrecht and 76 other current and former executives have signed plea deals agreeing to tell all in exchange for lighter sentences.

The Brazilian press has described the deal as potentially apocalyptic for the political establishment.

Panama, meanwhile, said it would request information from the United States about alleged Odebrecht bribes paid in Panama to secure contracts, its foreign ministry said.

Shattered record

The previous record bribery settlement was $1.6 billion for German engineering group Siemens in 2008. It settled charges of systematically using bribes and slush funds to land public works contracts around the world.

Margarida Gutierrez, an economist at the Federal University of Rio de Janeiro, told AFP that this settlement, Odebrecht's newest move to come clean, would open the door for its return to the market.

"Right now they are unable to participate in any bids in Brazil or probably out of Brazil," she said. "Now they can start again, and try to clear their name. They will succeed but it will be hard."

The US Justice Department will conduct an "inability to pay analysis" by March 31 to determine the final amount that Odebrecht must come up with. Sentencing has been scheduled for April 17.

Under the plea agreement, Brazil will receive 80 percent of Odebrecht's fines, while the United States and Switzerland will garner 10 percent each.

Braskem, which is traded on the New York Stock Exchange through American Depositary Receipts (ADR), saw its shares soar after the deal was announced, closing up four percent.

It will pay a criminal fine of $632 million, and another $325 million penalty to the US Securities and Exchange Commission.

Under the Braskem deal, Brazil will receive 70 percent of the fines, while US and Swiss authorities receive 15 percent. Sentencing for the firm has not yet been scheduled.

Brazil's Odebrecht, Braskem pay record fine in bribery case https://t.co/Wn8k2rgyX2 pic.twitter.com/RM9Shs8gzG

— AFP news agency (@AFP) December 22, 2016

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