Corrupción Corrupción

INVESTIGA LAVA JATO – “Car Wash” Investigation

Confessions and million-dollar payments point to Brazilian National Bank in the Lava Jato scandal

By Ghiovani Hinojosa / Convoca (Peru) - Translated by Lucero Ascarza and Ben Powless

Thursday. November 30, 2017

One of the most discreet actors in Operation ‘Car Wash”’s corruption scheme (Lava Jato in Portuguese) is the Brazilian National Economic and Social Development Bank (BNDES), which between 2002 and 2015 granted loans for more than 14 billion dollars to construction companies for construction projects in Peru, Venezuela, the Dominican Republic, Argentina, and Angola, among other countries. Several of these companies are being investigated for bribery payments. As part of the collaborative project ‘Investiga Lava Jato’, Convoca.pe gained access to documents on these schemes.

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On Saturday July 5, 2014, while the soccer teams of the Netherlands and Costa Rica battled on the field for the semifinal of the World Cup in Brazil, another match was being played at the house of the then-Vice President of the Republic, Michel Temer.

Temer, today president of Brazil, had invited the then-Director of Institutional Relations of the business group J&F, Ricardo Saud, to watch the soccer match at his home in São Paulo, according to the businessman’s confession to the Brazilian authorities.

Saud ensured that he took advantage of the relaxed atmosphere to bring to his host a piece of paper with the amounts that his corporation thought to “donate” to six senators of the Brazilian Democratic Movement Party (PMDB), to which Michel Temer belongs. In exchange, this group would support the Workers’ Party (PT), founded by Lula da Silva, in the October general elections.

PT had requested this help from the J&F business group, an old financier and owner of JBS, the world’s largest meat processor. According to the account of a state-turned witness (delator premiado) who turned state’s evidence, Ricardo Saud before the Federal Public Ministry, Temer was uncomfortable with the amounts of the distribution and said: “The PMDB has to go through me. I’m going to take over the party.” He then added: “And for me? What do you have?”

Eleven days later, on July 16, 2014, Michel Temer took over the presidency of his political party. Saud told the Brazilian court that he went to visit Temer in mid-August, at his vice presidential offices in the Jaburu Palace, to inform him that he had decided to deliver 15 million Brazilian reals (more than $6 million US at exchange rate in the days that the events happened), from which 1 million (about $450,000 USD) was for Temer himself.

Brazilian President Michel Temer (in the middle) next to the former Finance minister Guido Mantega (the first on the right), who would have been responsible for collecting the bribes from JBS.

This version was corroborated by another executive of J&F and state-turned witness (delator premiado), Florisvaldo Caetano de Oliveira, who confessed to being in charge of carrying the cash.

“The state turned state-turned witness (delator premiado) recalls that it took him a while to make the delivery and Ricardo Saud told him to hurry saying that the money was for President Michel Temer,” reads Caetano‘s confession made on June 16, 2017 to the Federal Police of Brasilia.

Where did the 15 million reals come from for the Brazilian Democratic Movement Party (PMDB) of Temer? According to the confessions of the informers that appear in the complaint of the outgoing general attorney of Brazil, Rodrigo Janot, against Michel Temer, they were payments “withdrawn from a current account of tips (bribes) for the PT, resulting from business obtained with the BNDES (Brazilian National Economic and Social Development Bank)”, the largest public development entity in that country.

According to the investigation of Brazilian prosecutors who track this case under the name of “Operation Bullish”, J&F made deposits every time the government party helped them obtain loans at the state bank. But this is just a part of the story.

Prosecutor Iván Marz, who is in charge of these investigations, told the newspaper Estadão that J&F has not told everything about the crimes committed in the bank, so he announced a lawsuit against company and demanded the payment of one billion dollars for damages to the bank treasury.

Joesley Batista, one of the owners of JBS: “If it were not for the pressure and accompaniment of Guido Mantega, the loan would not have come out”, he told the authorities on June 21. Photo: Veja Magazine.

The BNDES money, which comes out of Brazil’s public treasury with the contributions of its citizens, serves to expand business in several countries in Latin America and Africa, where there are several projects under suspicion of bribery payments from Brazilian companies to officials. .

As part of the collaborative project ‘Investiga Lava Jato’, Convoca.pe gained access to an extensive 2014 report from the Court of Auditors in which the court states that it found a policy of opacity in the bank’s credit information. This institution has at least seven investigations open for the granting of financing abroad.

MILLION-DOLLAR DISBURSEMENTS AND OPACITY

There’s a lot of money at stake. The bank granted loans, between 2012 and 2015, for $14.584 billion to construction companies, several of them investigated in the Lava Jato operation for paying bribes to high state authorities. This multi-billion-dollar amount of money equals one third of Peru’s public budget in 2017.

Odebrecht acquired 69.9% of the loans, followed by Andrade Gutiérrez (19.7%) and Camargo Correa (5.2%), according to the BNDES credit data base in the third week of September, as processed and analyzed by Convoca.pe.

The main destination of the loans was Angola (where roads, hydroelectric, basic sanitation and housing projects were mainly planned), followed by Venezuela, the Dominican Republic, Argentina, Cuba, Mozambique (mainly due to the questionable construction of the Nacala airport as it appears in the report ‘The tentacles of Odebrecht in Africa’), and Peru, among others. (See Ranking)

Source: BNDES / Elaboration: Convoca

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Several of the BNDES’ financial operations were given in a discretionary manner, according to the report of the Court of Accounts of the Union. For example, the bank didn’t have a database of cancelled loans, so it was difficult to assess whether they had favored some companies to the detriment of others.

The Court also found that when applying for their loans, some companies proposed budgets that didn’t agree with market values. Thus, there was “insufficiency in certifying the compatibility of the submitted project budget with international cost parameters practiced in the importing country” (finding 143). That is to say, doors were opened to cost overruns.

For the researcher Caio Borges, from the Brazilian organization Conectas, there is also no transparency about the environmental impacts that the works which enjoy the bank’s credits can generate. “There’s limited access to a series of documents and information about the mechanisms used by the bank in the evaluation of the possible socio-environmental impacts and violations of human rights generated by the financed projects,” he said.

In Peru, the bank’s database shows the registration of 60 loans between January 2002 and July 2014, but only the amounts linked to two projects appear: the construction of the Chaglla hydroelectric power station (Huánuco) for $340.4 million in the hands of Odebrecht, and another that was used in the water desalination plant for the Bayóvar project (Piura) for $58.2 million, managed by the Brazilian company Andrade Gutiérrez, also investigated in the Lava Jato operation.

Chaglla, which became the third largest hydroelectric complex in the country, excited President Pedro Pablo Kuczynski so much that when he was a candidate he visited the Brazilian engineers and recorded a video praising the project.

The granting of bank credits depends on decisions of the highest levels. The BNDES is governed by a board of directors made up of various ministries. 62.3% of the loans are granted through a contract between the BNDES and the foreign government, while 37.7% is signed with the company. In any case, before granting a loan, the BNDES assures that the company has been awarded the project abroad.

“With Dilma I was much more explicit, I said: ‘Madam President, you have two accounts, one that Guido said was yours and another that is Lula’s,’” said businessman Joesley Batista on May 3, 2017.

In that decision making, the payments come and go, according to the state-turned witnesses (delator premiado).

Inside Brazil, according to the confessions collected by the authorities, public officials influenced loans that benefited companies as we will see below.



GUIDO, THE INTERMEDIARY

JBS, the meat processing company of the Brazilian business group J&F, was one of the BNDES’ favorites. Joesley Batista, owner of the group with his brother Wesley, has told the authorities what he was doing to secure loans at the bank.

According to the testimony he gave to the Federal Police of Brasilia last June 21st, his relationship with the bank began in 2006 when he managed to meet with the president of the institution, the economist Guido Mantega, and asked him to “accelerate” a loan he had requested.

Batista had taken the decision to internationalize JBS, something that coincided with the declared objective of the BNDES to promote Brazilian business outside its borders. On that occasion, he needed money to buy the Argentine subsidiary of Swift, the American giant of the beef sector. “If it were not for the pressure and accompaniment of Guido Mantega, the loan would not have come out,” the executive confessed to policewoman Danielle de Meneses Oliveira Mady.

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With new credits, they were able to acquire the pork company Smithfield and the beef producer National Beef in 2008, both also from the United States. Next would come the purchase of another handful of companies. According to Brazilian police, the bank has granted JBS credits of at least 8.1 billion reals (about $2.6 billion dollars).

In return, the Batistas have made juicy “donations” to bank accounts opened for the occasion, according to the complaint. Joesley Batista ensured that the deliveries were made by Mantega himself, who, for the luck of the group, became Minister of Finance in 2006, a position he remained in until 2015.

Batista reported on May 3 of this year in Brasilia that the deposits to the PT as thanks for the BNDES loans “had two phases, the one of President Lula and the one of President Dilma. In the one of Lula, it come to about 70 million dollars, and 80 million for Dilma.” It’s believed that the money was used to pay bribes during the 2014 campaign.

The businessman Batista said that he met with both Lula and Rousseff and that both were aware of the “donations.” “With Dilma I was much more explicit, I said: ‘Madam President, you have two accounts, one that Guido said was yours and another that is Lula’s,’” he said.



LULA AND THE POOR NEPHEW

The construction company Norberto Odebrecht S.A., one of the most frequent borrowers of BNDES loans, managed between 2002 and 2015 loans for $10,207,967, 69.9% of the total registered in that period. A part of that amount was obtained through Companhia de Obras y Infraestrutura, which is under its control.

With this money they planned projects in the Dominican Republic, Argentina, Venezuela, Cuba, Guatemala, Mozambique and Angola. In Angola, they planned engineering projects with $3.144 billion granted by the bank, according to the database processed by Convoca.pe.The main projects there were the Laúca hydroelectric power station (which received a loan of $646 million), the Cambambe hydroelectric plant ($464 million) and the construction of 3,000 homes and the urban conditioning for another 20,000 ($281 million).

To secure the loans for Angola, Odebrecht had to use the same strategy as the JBS company: negotiate at the highest level outside office hours.

Laúca Hydroelectric Power Plant, in Angola. It was built by Odebrecht with a total loan of BNDES of 646 million dollars. Photo: Laúca Hydroelectric Facility.

According to the April 12 state-turned witness (delator premiado) testimony of Emílio Odebrecht, father of Marcelo Odebrecht, former president of the company, in 2009 the company sought President Lula da Silva to intervene on his behalf within the BNDES.

“Marcelo asked me to talk with Lula […] It was important that there was an extension of the credit line that Brazil had with Angola […] I remember that I reached Lula and asked him, because it was in process, if he could help ensure that there were no difficulties in extending that line of credit. It was a request that I was making,” the patriarch of the company confessed at the headquarters of the Federal Police of Brasilia. When the prosecutor that interviewed him asked him to clarify the accusation, “Did Lula interfere with the BNDES?” Odebrecht replied: “I have no doubt”.

The investigation carried out by the prosecutors Luciana Oliveira, Iván Marx and Francisco Vollstedt supported the charges against Lula for unfair advantages which was presented on October 7, 2016. The investigation also revealed the alleged benefits obtained by the former president in exchange of acting in favor of Odebrecht in the development bank.

“Marcelo asked me to talk with Lula […] It was important that there was an extension of the credit line that Brazil had with Angola […]”, confessed Emílio Odebrecht on April 12, 2017.

The first were payments for speeches delivered abroad, which totaled around 4 million reals ($1.2 million). In Angola he gave a talk in 2011 for which he received $100,000, and another in 2014 for which he received $153,000.

The second benefit was possible through his nephew, Taiguara Rodrigues Dos Santos who founded a company that, without any experience in construction, acquired 17 contracts with Odebrecht to operate together in Angola. Rodrigues won a total of 20 million reals (about $6.4 million) that came out of BNDES loans.

The company that would have operated as a façade, Exergia Brasil, was established on May 2, 2009 without any capital. Rodrigues only had high-school education. Two years ago, he told the authorities, he lived in a house consisting "of a bedroom and a living room." Towards 2011 he moved into a 255 square-meter duplex and began to drive a Land Rover worth 200,000 reals.

The indications that Lula was aware of his nephew’s suspicious business with Odebrecht can be found in WhatsApp messages that Rodrigues exchanged with some collaborators. For example, on January 21, 2015, at 11:50 in the morning, he wrote to Antonio Carlos Daiha Blando, the man in charge of the company's business in Angola: "I just spoke with my uncle on the phone, I already told him about the matter, he will receive me at four o'clock. I suggest that you e-mail me the projects so I can discuss them with him, please”.

Daiha replied: "Excellent, my friend! I will send! Thank you!" and added: "Then I will give him some advice, since you will be with him, to accelerate the operation of his that we talked about". The message was sent by the nephew through a mobile phone that is now in the hands of the authorities.

The former president Lula da Silva with his nephew Taiguara Rodrigues, who with only high-school education became an Odebrecht partner in Angola with contracts for 20 million reals. Photo: Veja Magazine.

According to the Public Ministry, the former president approached Rodrigues through José Carlos Bumlai, a friend of Lula and today in prison for the Lava Jato case. In an email that the nephew directed to an official of the Angolan public administration on July 27, 2009, he said that Bumlai “looked for me at the request of the Chief of Staff”, that is, the President, and warned that the envoy of his uncle “is very powerful” and “will bring financing”, in other words, the money of the Brazilian development bank.

Chaglla hydroelectric power station (Huánuco), the most expensive project financed by the BNDES in Peru. It was built by Odebrecht with $340.4 million from the Brazilian bank. Photo: Odebrecht.



“BUTTER”, THE SIGN OF THE BRIBE

Venezuela was the second-favorite destination of the Brazilian construction companies to spend BNDES money, after Angola. The Odebrecht, Camargo Correa and Andrade Gutiérrez companies, among others, obtained credits for roads, steel and fishing infrastructure in that country for a total of $3.231 billion.

Andrade Gutiérrez was the one that received the most loans: $1.503 billion dollars for the construction of the Astialba shipyard (in which ships will be manufactured to transport oil from Petróleos de Venezuela), the National Iron and Steel Works and other projects.

Flavio Machado, executive of the Andrade group and state-turned witness (delator premiado), has confessed that to secure the credit of the steelmaker they paid as a “tip” 1% of the loan to the PT (the credit was of $865.4 million).

According to the affidavit number 3989, classified as secret by the Brazilian court and dated on April 28, 2016, Andrade Gutiérrez delivered the “donation” through the treasurer of the governing party, Joao Vaccari. “These events were also corroborated by Rogério Nora, then president of the construction company Andrade," states the aforementioned document on page 27.


Testimony of the executive of Andrade Gutiérrez, Flavio Machado, before the Brazilian Police: “Vaccari charged 1% tip in relation to the securities financed by the BNDES in that work in Venezuela.”

Otávio Marques de Azevedo, former president of the Andrade group, has gone further in his testimony and has revealed that former president Lula helped him obtain the contract for the National Steelworks. He repaid the help by hiring him as a speaker, for which he paid him a total of 3 million reals (about $959,000 dollars). As can be seen, Odebrecht didn’t just appeal to the oratory capacity of the former president to repay his favors.

On other occasions, the illicit payments went to the Chamber of Foreign Trade of Brazil (CAMEX), which had a direct influence on the BNDES by granting the indispensable credit insurance for exports. This is what Marcelo Odebrecht's company did when it requested $1.5 billion for the project of burying the Sarmiento metro line underground in Buenos Aires, and an undetermined amount for another project in Mozambique.

In this case, it was the president of CAMEX, the then Minister of Development, Industry and Foreign Trade, Fernando Pimentel, who conditioned his help with the credits on the delivery of shares worth 20 million reals (about $6.4 million). The construction company bargained and managed to close the deal for 15 million reals (about $4.8 million), to be delivered by parties as the loan approval process progressed.

Otávio Marques de Azevedo, in the background, and Marcelo Odebrecht, former directors of Andrade Gutiérrez and Odebrecht, respectively, detained on June 19, 2015. Photo: Antonio More / Gazeta do Povo News Agency.

At the beginning of 2013, only when the first quota of the bribe had already been delivered did the company present the request to the BNDES. Part of its philosophy was to walk on solid ground.

According to the complaint filed by the deputy general attorney of the Republic José Borges de Andrada against Pimentel for unfair business practices this past November 7, the intermediary of Marcelo Odebrecht in this case was João Nogueira, director of Export Credit of the company, who had more than one coffee with Benedito Rodrigues, the envoy of Fernando Pimentel, to coordinate the details of the delivery of the bribe.

The person in charge of receiving the packages of cash was Pedro Augusto de Medeiros, a trusted confidant from Rodrigues, who stayed at hotels in São Paulo while waiting for the company’s emissaries.

The first delivery was made on September 19, 2012. The second one occurred in March 2013. The location on this last occasion was room 1304 of the Quality Moema hotel. In the third appointment, made the following month, the password established the delivery agents to identify themselves was “4 Blanco, 5 Pimienta” (“4 white, 5 pepper”).

The Federal Public Ministry, based on complaints and seizure of electronic equipment, has established that each delivery was at least 500,000 reals (about 160 thousand dollars).

Sarmiento Metro, in Buenos Aires, remained unburied despite the fact that the BNDES had already approved a loan for Odebrecht to do the work. To achieve this, it would have paid a bribe of 15 million reals. Photo: Fyseg.

A few months later, on July 16, CAMEX, chaired by Fernando Pimentel, approved in its 96th session the granting of credit insurance for the loan requested by Odebrecht for Argentina. The next day, Nogueira and Rodrigues exchanged text messages celebrating the decision. The minister's emissary wrote: "You do not ask, comrade. You order!" He said goodbye with" hugs and congratulations."

On the same day, Marcelo Odebrecht and Pimentel met later in Brasilia. In the end, despite the fact that the construction company got the money, it failed to close the contract with the government of Argentina and the work was not carried out.

There remained, then, the credit for Mozambique, on which they focused themselves since August 2013. The idea was to build an interurban transport corridor for the city of Maputo. As it was decided, CAMEX gave the approval and the BNDES granted the loan. The following five deliveries of money were made to hotels in São Paulo: the passwords were "butter," "mango," "lettuce," "ladder," and, in February 2014, "cotton." In the end, that project wasn’t executed either. Pimentel, however, didn’t have to return the 15 million. A bribe received isn’t given back.

THE AUDIT OF THE BNDES

The BNDES responded via e-mail to Convoca.pe, through its Press Office at its headquarters in Rio de Janeiro that, “the facts from official investigations are the subject of an integral evaluation by internal recount commissions set up by the BNDES, which are still in the final phase.” This is the work of the Comissão de Apuração Interna.

They recalled that in October of last year they announced a new procedure for the financing of Brazilian exports of engineering and construction goods and services. Such procedures are supported, they claim, in the analysis of future operations and also the re-evaluation of 21 operations whose disbursements are still suspended since May 2016.

The bank ensured that the new criteria was established taking into account the consultations held with the General Legal Profession of the Union, a body that depends on the Brazilian Presidency, and the other organs of the official export support system, as well as the recommendations formulated by the Court of Accounts of the Union in its audits.

Concerning the concentration of loans in the hands of Odebrecht, the main construction company investigated in Lava Jato, they responded: "It is worth noting that 90% of the services executed by Brazilian construction companies in projects abroad didn’t have the BNDES financing. The greater participation of Odebrecht in BNDES financing for the export of engineering services reflects its status as the largest Brazilian player in this sector in the international market."

In addition, they claimed that in the granting of credits they take into account the environmental impacts according to the legislation in force in the country where the project is executed.

This report was made thanks to the support of Law, Environment and Natural Resources (DAR) and the Ford Foundation.