Odebrecht Corporate Crime

Carlota Pereira da Silva

09 November 2020

Corporate crime refers to a crime committed by an individual that acts on behalf of a corporation or by a corporation for the benefit of their employing organization. The number of companies that have committed fraud or bribery has increased from 37 percent to 45 percent since 2003 (Pressly, 2018) There is an increase in multinational companies committing crimes over the past year. In 2014 Sergio Moro, formal Minister of Justice of Brazil introduced the largest anti-corruption and money laundering initiative in the history of Brazil, called the Lava Jato (Car Wash) operation. It resulted in numerous cases of various types including the corporate crime committed by Odebrecht. Odebrecht a Brazilian multinational construction company was found guilty of corruption in 12 nations.

Operation Lava Jato is a set of investigations by the Federal Police of Brazil, which has served more than a thousand searches and seizure warrants, temporary arrest, preventive detention, and coercive conduct, aiming at investigating a money laundering scheme that moved billions of “reais” in bribes (Dinheirama, 2015). Operation Car Wash investigated Odebrecht the multinational Brazilian construction company and it has been the center of the biggest corruption scandal. Odebrecht is part of a very influential and powerful family in Brazil, and Marcelo Odebrecht was the former CEO of the corporation founded in 1944. Initially, Odebrecht was mentioned secondarily, but suspicions against the country’s largest contractor began to rise. They resisted and on several occasions declared that it had no involvement in illegal negotiations. After all, Odebrecht is accused of having been favored through bribes, some of them paid to senior political leaders and even presidents of the republic. In more than a hundred projects between 2001 and 2016 Odebrecht committed fraud in a total of 12 countries in which the multinational did business: Angola, Argentina, Brazil, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Mozambique, Panama, Peru, and Venezuela. These illegal payments decision-makers to gain competitive advantages in contests to be able to represent and work in the biggest construction projects. The investigations discovered that the company had created a sector, closed doors, that function exclusively to make illegal payments to politicians and employees. Around 600 million dollars were committed to undeclared payments, which is about 2 percent of the corporation’s income which was mainly used to pay bribes (Dinheirama, 2015). The list of senior political and public officials from various countries, especially in South America, continues to grow concerning those involved in the bribery case paid by Odebrecht to win construction contracts.

As the investigations continue since 2015 up until today’s date, Lava Jato continuously finds more stakeholders involved. The corporate crime that once commenced as an individual crime by Marcelo Odebrecht, after investigations he told prosecutors that everyone at the top of the company knew that 0.5 percent to 2 percent of the corporation’s income was moved off-the-books and into brides (Dinheirama, 2015). This became a collective crime and a vast number of politicians, presidents, and public officials were investigated and charged for accepting bribes given by Odebrecht. After Marcelo Odebrecht was arrested and repeatedly denying any irregularity, he and 76 other executives and former executives of the company ended up closing a prize agreement. Everyone recognized the scheme for the payment of bribes, in several countries to obtain contracts for the construction of public works. Odebrecht decreased in size, lost business, committed to returning billions of dollars, and ended up with judicial recovery with 100 billion dollars in debt (Carranza, 2019). After Marcelo was imprisoned for two and a half years in Curitiba he was entitled to house arrest at the end of 2017. In 2019 he was able to return to the company, with a position of director, but the company is accompanied by independent auditors after a leniency agreement was established with the Federal Prosecutor’s Office and the US Department of Justice. The auditor recommended the dismissal of Marcelo from the company with the concerns of a possible comeback of illegal practices. Marcelo accused his father of taking the company to a judicial recovery and accused the new president of Odebrecht, Ruy Sampaio, of receiving intermediating undue payments. Ruy Sampaio counterargument in the newspaper “Valor Economico” accusing Marcelo of blackmailing the deal with the Public Ministry receiving 240 million and demanded compensations totalling 310 million (Carranza, 2019). Marcelo’s father was also a whistleblowers of the company and was sentenced to four years in prison which he was allowed to serve at home. From the 77 whistleblowers, only 9 still work for the company and Marcelo is currently a minority shareholder in the company that he runs for seven years (Globo, 2017). Of the heirs, only Marcelo’s younger brother, Mauricio Odebrecht, remains on the company’s board. Minister Edson Fachin, a reporter for Lava Jato at the Supreme Federal Court opened 76 inquiries against politicians and the Supreme Court authorized the investigation to open against 8 ministers of the government of Michel Temer (Galas, 2019).

The biggest corruption scandal, Odebrecht, in Brazil’s history had impacts on society and companies. After investigation commenced by Lava Jato, they were able to find various corruption cases. People were found guilty and incarcerated, public officials and politicians lost their jobs, companies were on the verge of bankruptcy, and people were living in fear. In the trials of Odebrecht there were gaps in the law and conflicts of interest that arise in the case since so many people were involved. It was hard to determine you should me convicted for the crime and there was lack of trust on federal judges. There was complicity between the lawyers, politicians and other big businesses that had received brides from the corporation. Apart from these problems that arise from the case, due to the size of the company it had an impact on society. Lava Jato paralyzed sectors that have a large weight in the total investments of the economy. A consultancy company, Tendencias, calculated that the investments of Petrobras, which was part of Odebrecht, had investments equivalent to 2% of the GDP, and the contributions of large construction companies involved in the scandal of infrastructure works of 2.8 percent (Dinheirama, 2015). Due to the Lava Jato, construction companies such as Odebrecht and Camargo Correa have received their investment plan, in addition to Petrobras itself, which reduced the volume of investments planned by 2019 by more than 30%. (Dinheirama, 2015). This also resulted in a higher unemployment rate and inflation. For this to not have occurred the solution is that Operation Lava Jato should have commenced years ago and it would have decreased the amount of corruption in Brazil. Brazil is one of the most corrupt countries in the world and that is the reality they have always had. Consequently, that is why Operation Lava Jato was a wideout for many companies. Another purposed solution is to maintain an independent auditor from trustful companies to ensure that the company has no fraudulent transactions and financial statements are accurate. This lengthens operation should continue and everyone involved should be charged for it and perhaps employees and top-end people of Odebrecht should have continuous investigations so that they feel the pressure.

The Odebrecht bribery case was the biggest corruption scandal in the history of Brazil. Their influential business and powerful company have led to various bribes to gain the biggest constructions for public works. The bribes made to politicians, presidents, lawyers, and other public officials increased massively and exponentially the company’s earnings making them a multinational construction company. The Lava Jato operation investigated the company and many inside the company were found guilty and charged. This had a major impact on the economy of Brazil and reduced volumes of investment by more than 30%. This corporate crime was ongoing for several years and it had not been possible to contain if Lava Jato did not exist. Odebrecht in today’s time continues to be under the control of the Federal Police.

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