Americas

Corruption, Inc.


The superlative is official: Brazil’s iconic construction firm, Odebrecht, is now the world’s most corrupt company.  In terms of fines levied by governments for corruption and impropriety, the company has no equal.  According to documents filed in December, the Brazilian engineering firm provided over $850 million in kickbacks and bribes for more than 100 projects in 12 countries, including Brazil, Argentina, Colombia, Dominican Republic, Ecuador, Guatemala, Mexico, Panama, Peru, and Venezuela in return for $3.34 billion in illicit benefits. The company was recently fined up to $4.5 billion by the U.S. Justice Department for violations of the Foreign Corrupt Practices Act, or FCPA, becoming the largest fine ever imposed in a foreign bribery case.  In Brazil, the company faces additional investigations and fines from Operation Car Wash, which uncovered an elaborate scheme to overbill the state oil company, Petrobras, and enriched top government officials and company executives in the process. Panama recently banned Odebrecht from bidding on any contracts and imposed a fine of $59 million. In Peru, the number is $9 million and will rise as their own investigation unfolds. It seems that with each passing day Odebrecht racks up new fines from around the world over improprieties surrounding its practice of systemic bribery and kickbacks to secure lucrative public works contracts.

Yes, history is littered with many a corrupt company. What makes the Odebrecht case unique, however, is the extent of Odebrecht’s tentacles in the highest levels of government throughout Latin America and the impact of its malfeasance on respected political figures, heads of sitting governments, current ministers, and prominent party members. Through its Division of Structured Operations – think a bribery department – Odebrecht set up a network of offshore shell companies in order to direct payments to foreign officials.  On Feb 9th, former president Alejandro Toledo, who ruled Peru from 2001 until 2006, was indicted by a Peruvian court for taking an estimated $20 million in bribes from Odebrecht while in office. The news shook society in Peru, which regard Toledo as a successful president who enacted successful reforms and programs in the country. In Colombia, the government of Juan Manuel Santos is accused of taking $1 million in campaign contributions from Odebrecht. His former Vice Minister of Transportation accepted a $6.5 million bribe in return for favoring Odebrecht for a lucrative contract. A former senator, Otto Bula, was arrested for conspiracy to award a massive highway construction project to Odebrecht. Meanwhile, Panamanian legislature is formulating charges against former president Ricardo Martinelli, who is accused of taking $59 million in kickbacks. Lamentably, Odebrecht will have to wait for regime change in Venezuela ($98 million in bribes), Ecuador ($33.5 million) and the Dominican Republic ($92 million) to realize its fines in those countries.

Back in Brazil, president Michel Temer continues to deal with the turmoil of Operation Car Wash, which turned over the proverbial brick of systemic graft in the Brazilian government. Former president Dilma Rousseff was impeached and her predecessor, Luiz Ignacio Lula de Silva faces corruption charges in connection with Odebrecht bribes. Brazilian citizens have expressed a deep loss of faith in public institutions and leaders as a result.

The revelations of the Odebrecht corruption scandal and Operation Car Wash are merely high-profile reinforcements of what Latin Americans already know: endemic corruption is commonplace in public and private sectors across the country. All too familiar is the cycle of political swings where political challengers are elected to solve the corruption problem, only to become entrenched in it themselves and meet an ouster by those who vow to fight corruption. What’s more, the popular use of Public Private Partnerships (PPPs) for large transportation and hydroelectric projects, in which contracts can be amended post-award with addenda, are ripe for fraud and have become the de facto scheme for corruption by companies and government officials.

This regrettable commonality notwithstanding, the Odebrecht scandal can serve a positive purpose in Latin America. The fall of the nefarious dominoes across the continent shows that corruption has been dealt with swiftly and severely and may cause companies like Odebrecht and corrupt government offficials to think twice about illicit partnerships.  In the weeks and months that follow, a postmortem of Operation Car Wash can produce a formula for finally defeating corruption, including factors such as a citizenry connected to the internet and social media and an independent law enforcement arm of the government. A new atmosphere of public accountability with real consequences could well usher in a new era for Latin America.

Image courtesy of the Vepetrelli, © 2015.

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