Brazil - Corruption
Corruption is a problem in Brazil. In 2010, Brazil ranked 69th (among 178 countries) in Transparency International's Corruption Perception Index. In South America, Brazil ranked below Chile and Uruguay, and ranked above Colombia, Peru, Argentina and Venezuela. With regard to major emerging economies, Brazil ranked above India, China, Russia, Egypt, and Indonesia, and below South Africa and Turkey. In general terms, businesses find corruption a challenge in government procurement and at some levels of the judiciary.
Since the late 1970s, restoration or establishment of democracy has produced stronger legislative bodies in many countries. Most notably in Latin America, newly-restored legislatures have taken a leading role in combating executive branch corruption. The most conspicuous example of this was the congressional impeachment of Brazilian President Fernando Collor de Mello, initiated by the Parliamentary Commission of Inquiry. Brazil completed its transition to a popularly elected government in 1989, when Fernando Collor de Mello won 53% of the vote in the first direct presidential election in 29 years. In 1992, a major corruption scandal led to the impeachment and ultimate resignation of President Collor. Vice President Itamar Franco took his place and governed for the remainder of Collor's term. More recently, the Brazilian Senate formed a special committee to investigate allegations that government officials had been involved in fraudulent sales of government bonds.
Corruption scandals are a regular feature of Brazilian political life. Serious corruption accusations involving Lula’s closest associates and allies began to emerge in 2005, leading to a series of Congressional investigations. Despite attempts to minimise and contain the crisis, the scandal saw the resignation of several leading figures in the President Lula's Party of Labor [PT], and investigation continues in Congress.
In July 2004, a weekly news magazine in Brazil reported that Henrique Meirelles and Luiz Augusto Candiota, the Central Bank’s president and director of monetary policy, respectively, were being investigated by the public prosecutor’s office for tax evasion and other fiscal infractions and that their names had been mentioned at a Parliamentary Commission of Inquiry (Comissão Parlamentar de Inquérito, or “CPI”) investigating capital flight through Banco do Estado do Paraná S.A. (“Banestado”), then the bank of the State of Paraná. According to the report, Mr. Meirelles had failed to file a tax return for 2001 on the grounds that he had been living abroad, although he had claimed that he was a resident of the State of Goiás during that period to run for Congress as a candidate of the Brazilian Social Democratic Party (Partido da Social Democracia Brasileira). Mr. Candiota, according to the report, had failed to report transfers of funds through MTB Bank in New York. Both individuals have denied any wrongdoing. Mr. Candiota resigned from his position, saying that he wished to avoid harm to the Central Bank. The public prosecutor’s office subsequently confirmed that it was conducting these investigations. Law No. 11,036 dated December 22, 2004, elevated the Governor of the Central Bank to ministerial status. As a result of such ministerial status, the Governor of the Central Bank can only be tried by the Federal Supreme Court.
On May 25, 2005, a joint session of the National Congress approved the formation of a CPI to examine charges of corruption in the postal service. The vote to form the CPI came after the release by a news magazine of a video recording of the former head of the postal service’s procurement and inventories management department appearing to accept a bribe and stating that he represented a government-allied political party, later identified as PTB. The final report of the CPI on the postal service was approved in April 2006. The Report confirms that Congressmen have received money in exchange for voting in favor of the Federal Government. However, no connection with President da Silva has been established.
On June 6, 2005, a daily newspaper in São Paulo reported that Roberto Jefferson, the head of the PTB, had alleged that PT had paid certain Congressmen $12,000 per month for their support in Congress. Mr. Jefferson further alleged the payments had continued, even after he had informed Cabinet Chief José Dirceu and Finance Minister Antônio Palocci. According to Mr. Jefferson, the payments stopped only after he had informed President da Silva of such payments. Mr. Jefferson stated that President da Silva had been previously unaware of such payments but alleged that certain senior officials of PT had overseen such payments.
PT denied the allegations. Testifying before the Congressional ethics committee on June 14, 2005, Mr. Jefferson admitted that he had no evidence to support any of his accusations. Mr. Jefferson and certain members of his party are the focus of the CPI investigation on corruption in the postal service and the IRB. On June 14, 2005, the President of the National Congress received a formal request signed by 205 Deputies and 41 Senators for the installation of a CPI to examine the accusations made by Mr. Jefferson. On June 16, 2005, Mr. Dirceu resigned from his position as Cabinet Chief. On July 5, 2005, the National Congress approved the formation of a CPI to investigate the allegations of monthly payments to legislators. Known as the “CPI do Mensalão,” this CPI also charged that similar payments had been made during former President Fernando Henrique Cardoso’s administration to purchase votes for, among other things, a constitutional amendment that permitted Mr. Cardoso and State Governors to run for reelection. On November 16, 2005, this CPI was concluded without taking any further action.
Certain opposition parties filed suit against the PT on July 19, 2005 after the former treasurer of the PT admitted during a television interview in July 2005 that the PT had raised funds illegally to finance election campaigns. The chairman, president and treasurer of the PT each resigned from their respective posts in July 2005. On September 2, 2005, two parliamentary commissions of inquiry jointly recommended the expulsion of 19 Congressmen accused of participating in the scheme involving monthly payments to certain legislators. Four Congressmen resigned, and 12 were acquitted. The Chamber of Deputies has expelled Roberto Jefferson, for, among other things, making allegations without proof of alleged monthly payments to certain Congressmen in exchange for their support. Former presidential chief of staff José Dirceu and Pedro Corrêa were also expelled. Severino Cavalcanti, a member of the PP and president of the Chamber of Deputies, who has been accused of extorting payments from a catering company operating in the Congressional building, also resigned after facing expulsion. Aldo Rebelo, a Congressman from PCdoB, an ally of the Federal Government, was elected as president of the Chamber of Deputies.
On 23 October 2012, the Supreme Court opened the sentencing phase of Penal Case 470, also known as the Mensalao case. Former president Luiz Inacio Lula da Silva’s chief of staff, Jose Dirceu Lopes, former PT president Jose Genoino, former PT treasurer Delubio Soares, and 22 other defendants were convicted of corruption-related charges. Investigation of the Mensalao scandal began in 2005, two years into Lula’s first term, after Lula’s party, the PT, was accused of buying congressional votes with a large monthly payment (“mensalao”) to cement a majority among the government’s broad-based coalition and win approval for PT-backed commercial projects. Of the 25 convicted defendants, 23 were sentenced to jail time but at the end of 2012 had not begun serving their sentences, pending the court’s publication of the official trial record (expected early in 2013). Federal prosecutor Roberto Gurgel filed a December 2012 appeal seeking immediate imprisonment for the convicted defendants. However, Supreme Court Chief Justice Barbosa denied the appeal, noting that the defendants’ passports had been ordered seized and they represented no flight risk.
On March 27, 2006, Antonio Palocci Filho resigned as Brazilian Finance Minister. Mr. Palocci had served in that position since January 1, 2003. President da Silva designated Guido Mantega, the president of the BNDES, to replace Mr. Palocci as Finance Minister. Mr. Mantega has served as the Minister of Finance since March 28, 2006.
The parliamentary commission of inquiry which investigated corruption in the postal service approved its final report on April 5, 2006. The report concluded that there is evidence of monthly payments to Congressmen and incriminated more than 100 people.
In June 2006, members of the Bingo CPI approved a final report recommending the indictment of 48 people, including the ex-Minister of Finance, Antonio Palocci. Regarding irregular campaign financing, the final report recommends the indictment of Paulo Okamotto, the President of the Brazilian Support Service to Micro and Small Companies. Mr. Okamotto is accused of money laundering and crimes against the tax system. The document was sent to the General Attorneyship of the Republic, the Federal Police and State offices in order to continue the investigation.
Corruption dominated press coverage in the build up to October 2006’s Presidential, Congressional and State Governor elections. The most visible consequence of this was the fact that the Presidential elections were taken to a second round. Corruption scandals, including a deal in which small, unprincipled and rapacious parties were put on the government payroll, nearly prevented Lula's re-election. While his PT party has recovered slightly from its ethical disasters, he has had to rule by means of a series of coalitions, and the pork-barrel business of politics in a large, federal country has not greatly altered.
Corruption investigations, involving politicians from both opposition and government coalition parties, were conducted over the course of the last several years. In 2010, in two separate cases, the governor of the Federal District and the governor of the state of Amapa were arrested and placed in prison on corruption charges. In the Congress, ongoing public scandals involving the leadership of the Senate and various members of congress have led to low ratings for the institution among the Brazilian public. Increasingly, the court system has taken steps to curb impunity among public officials. These steps have been well received by a public accustomed to abuses by authorities.
On December 4, 2007, Renan Calheiros resigned as president of the Brazilian Senate immediately before an impeachment vote was scheduled in the Senate. Calheiros had been accused of five different charges before the Ethics Council of the Senate, including having personal expenses paid for by a construction company. By resigning, Calheiros avoided expulsion by the Brazilian Congress, which could have prevented him from running for elected office for at least eight years. Calheiros has been acquitted from two of the charges, while the rest of the charges were dismissed for lack of evidence. Senator Garibaldi Alves Filho, from the PMDB, was elected President of the Senate on December 12, 2007.
On March 11, 2008, the Brazilian Congress appointed a Joint Parliamentary Committee of Inquiry to investigate irregularities in the use of Federal Government issued corporate credit cards by members of the Federal Public Administration during the administrations of former President Fernando Henrique Cardoso and President Lula. The final report, released on June 5, 2008, proposes rules to limit the issuance and the use of the corporate credit cards. No member of the current or past Federal Government was named in relation to any wrongdoing. Also, on April 9, 2008, a Senate Parliamentary Commission of Inquiry was created to investigate these irregularities.
On August 21, 2008, the Brazilian Federal Supreme Court issued a decision (Súmula Vinculante No. 13 de 21 de Agosto de 2008) prohibiting nepotism in the executive, legislative, and judicial branches of government. In 2005, the National Council of Justice (CNJ), a judicial agency responsible for the administrative and financial control of the judiciary and the supervision of judges, had prohibited nepotism in the judiciary (Resolução No. 7 de 18 de Outubro de 2005) and the prohibition was being considered by the Supreme Court, due to an action previously filed by the Brazilian Magistrates Association (Associação dos Magistrados Brasileiros) asking for acknowledgement of the constitutionality of CNJ's 2005 resolution.
After affirming the constitutionality of the resolution, the Supreme Court extended the prohibition to all three branches of the government, making the hiring of relatives who have not passed a public service entry exam a violation of the Constitution in the federal government, the state government, the Federal District, or the municipalities. This applies whether the person is hired directly by an administrative organ or by an independent organization that does government work.
In Brazil, fighting corruption at the local level in one particular community resulted in a manual for citizens that contains tips on and signs of corruption. They have continued to update the "Manual for Spotting and Fighting Corruption" building on experiences from other cities. Ten years later, the manual is still in demand around the world from NGOs, neighborhood associations, commercial associations, unions, regional category councils.
Brazil's anti-money laundering mechanisms and relatively independent prosecutorial and oversight institutions have played useful roles in the investigation of such cases. In June of 2010, the President signed into law Complementary Law 135, known as the “Ficha Limpa” law, which prohibits candidates convicted of crimes, including abuse of public office, from running for office. The Brazilian Supreme Court subsequently implemented the Ficha Limpa with respect to the 2010 federal, state, and local elections.
Brazil is a signatory to the Organization for Economic Cooperation and Development (OECD) Anti-Bribery Convention. Brazil has laws, regulations and penalties to combat corruption, but their effectiveness is inconsistent. Bribery is illegal, and a bribe by a local company to a foreign official is a criminal act. A company cannot deduct a bribe to a foreign official from its taxes. While federal government authorities generally investigate allegations of corruption, there are inconsistencies in the level of enforcement among individual states. Corruption remains problematic in business dealings with some parts of the Brazilian government, particularly on the local level. U.S. companies operating in Brazil continue to be subject to the U.S. Foreign Corrupt Practices Act.
A number of Brazilian politicians are corrupt, and yet that doesn't seem to diminish their chances come election time. Some known to have dubious records remain veteran politicians. For years, embezzlement and corruption have plagued Brazilian elections, and yet the electorate continues to vote for the same convicted politicians time and time again.
In Sao Paulo, former governor Paulo Maluf is known by his catchphrase "Corrupto, mas faz," which translates as "Corrupt, but hands-on." The verb "Malufar" actually derives from the 83-year-old's name and has become a regular word in Brazil's Portuguese vocabulary, simply meaning "to steal from the state." Critics claim the ex-governor has embezzled hundreds of millions of euros over the years. Interpol has an international warrant out for his arrest.
During the 2014 election campaign, the state-run oil concern Petrobras had to give a moral oath of disclosure. Indiscretions by a former director provided shocking details on the goings-on in the company, which allegedly only commissioned work in return for bribes. It is still not clear just how much President Dilma Rousseff knew about the company's politics of corruption.
The Brazilian oil giant Petrobras said it will improve its "internal policing" after being hit by a corruption scandal that's wiped billions off the value of the firm. Members of the government ae accused of taking kickbacks. Twenty-three people were arrested on 18 November 2014 on suspicion of money laundering and graft involving the company. Rousseff said the investigation could change the country forever.
The graft scheme could be the biggest yet uncovered in Brazil’s history, and it complicates one of the president’s big problems: keeping support among her base in congress. By early 2015 the ongoing federal investigation into the alleged kickback scheme had already resulted in charges against 39 people, many top executives from Brazil’s biggest construction and engineering firms, and it is expected to implicate dozens of politicians, many from the ruling coalition.
Brazil's largest weekly magazine "Veja" found indications that Lula and Rousseff were implicated in the scandal of Petrobras. When federal investigators first identified signs of corruption at Petrobras in 2009, Dilma Rousseff insisted Brazil's state-run oil company had nothing to hide. "Petrobras has one of the most accurate accounting standards in the world," said Rousseff, who was then chair of its board. Rousseff says she did not know about the corruption, or participate in it, when she was Petrobras' chairwoman from 2003 to 2010. Opposition leaders said they believe her and that she is unlikely to face impeachment.
On 09 March 2016 Lula was charged with concealing assets, money laundering, and document forgery. The charges were brought forward by prosecutors in the state of Sao Paulo who are conducting an investigation in parallel to the investigation being carried out by federal prosecutors. However, the charges have been conclusively denied by Lula and his legal team. His lawyer, Cristiano Zanin Martins, said on Thursday that there was a "media campaign" against the former president. The request by Brazilian prosecutors for preventive detention for ex-president, Luis Inacio Lula da Silva, has no legal basis and makes clear their lack of neutrality and their political aims, the former president’s representatives said.
Banker Joseph Yacoub Safra, the billionaire owner of the Gherkin [the landmark London building], has was accused on 31 March 2016 of corruption by the Brazilian federal prosecutor's office in connection with Operation Zelotes. Safra, the world's richest banker, with an estimated $18.3billion fortune, was accused of corruption in relation to a conspiracy to pay $4.2million in bribes to tax officials, said the Brazilian prosecutors. The Brazilian authorities said Safra wasn't directly involved with the alleged corruption scheme.
The charges filed were a follow-up of a broader police inquiry, known as "Operation Zealots," into kickbacks by companies through lobbyists. Dozens of other Brazilian firms, including steelmaker Gerdau SA, have also been under investigation
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