Sunday, July 20, 2014

Brazil: Petrobras Executive, Eight Defendants Charged in Over-billing Scandal

According to The Latin American Tribune, prosecutors have filed fraud charges against an executive of Petrobras and eight other suspects over alleged gross over-billing for a contract, the latest corruption scandal to rock the Brazilian state-controlled oil giant.

Petrobras’ former chief international officer, Jorge Luíz Zelada, is accused of favoring Brazil’s Odebrecht in a 2010 auction in which the construction group was awarded an $825.6 million contract, the Rio de Janeiro state Attorney General’s Office said in a statement.

Also under investigation are Odebrecht’s contract director, Marco Antonio Duran, and the Petrobras attorneys, technicians and engineers who were involved in the alleged fraud related to a project to adapt Petrobras’s assets in eleven countries

The suspects could face up to four years in prison and fines equivalent to 2% of the value of the Action Program for Certification in Safety, Health and Environment contract, or PAC SMS.

The Rio de Janeiro AG’s office also has urged state police to open probes into other suspicious contracts signed in recent years by Petrobras, including the 2010 sale of the refinery in San Lorenzo, Argentina, a transaction that already is under investigation for alleged irregularities.

Prosecutors also suspect wrongdoing in the purchase of an exploratory block in Namibia, the contracting of an offshore drilling company, and the 2013 sale of Petrobras Argentina’s 27.3% stake in energy distributor Edesur.

COMMENT: Brazil’s Congress has already created a pair of commissions to investigate allegations of corruption involving two Petrobras transactions. One of them, approved by Petrobras’s board in 2006, when it was chaired by incumbent Brazilian President Dilma Rousseff, involved the purchase of a US refinery at an exorbitantly high cost.

Opposition parties have called on Rousseff to explain her role in approving that acquisition; the President herself has demanded a thorough investigation into alleged irregularities.

The other controversial transaction was Petrobras’s joint venture with Venezuelan state oil company PDVSA to build the Abreu e Lima refinery in the northeastern Brazilian state of Pernambuco. Petrobras later abandoned its partnership with PDVSA after the Venezuelan company was unable to secure its share of the funding for the project, whose price tag has soared from an initial budget of $2.5 billion to more than $18 billion.