Brazil’s Odebrecht, Braskem, Ordered to Pay $3.5 Billion in Bribery Case
Posted: Wednesday, December 21, 2016 – 2:23 PM
(AFP) Brazilian construction giant Odebrecht and petrochemical affiliate Braskem have agreed to pay a record $3.5 billion to settle a vast international bribery case, US officials said Wednesday.
Odebrecht agreed to a fine of $4.5 billion but said it was only able to pay $2.6 billion, the US Justice Department said in a statement. Braskem, meanwhile, will pay $957 million.
The fines are to be paid to Brazilian, Swiss and US authorities, the department said, calling it “the largest-ever global foreign bribery resolution.”
The Odebrecht conglomerate pleaded guilty to bribing government officials and political parties to the tune of $788 million to secure business on three continents — with the vast majority of this occurring in Brazil, where the scandal has caused a political crisis.
“Odebrecht and Braskem used a hidden but fully functioning Odebrecht business unit — a ‘Department of Bribery,’ so to speak — that systematically paid hundreds of millions of dollars to corrupt government officials in countries on three continents,” US Deputy Assistant Attorney General Sung-Hee Suh said in a statement.
“Such brazen wrongdoing calls for a strong response from law enforcement, and through a strong effort with our colleagues in Brazil and Switzerland, we have seen just that.”
– Political fallout -In the main scheme, Odebrecht targeted top Brazilian politicians and executives at state oil company Petrobras for more than a decade starting in about 2001. The bribes were used to secure inflated contracts and even get favorable legislation passed in Congress.
Revelation of the scandal has rocked Brazil’s political and business establishment to its foundations, with ex-president Luiz Inacio Lula da Silva facing trial and current President Michel Temer reportedly under suspicion.
Suh praised the Brazil’s judiciary for tackling the issue head on.
“I cannot praise their efforts enough. They have been under enormous pressure, done an extraordinary job of initiating the investigation and carrying it through,” she said.
The Brazilian probe, known by its codename Operation Carwash, has cast dark shadows over two of Brazil’s most important companies adding to economic pain as the country flounders in deep recession.
Margarida Gutierrez, an economist at the Federal University of Rio de Janeiro, told AFP that the settlement would open the door to Odebrecht’s return to the market.
“Right now they are unable to participate in any bids in Brazil or probably out of Brazil,” she said. “Now they can start again, and try to clear their name. They will succeed but it will be hard.”
The US Justice Department will conduct an “inability to pay analysis” by March 31 to determine the final amount that Odebrecht must come up with. Sentencing has been scheduled for April 17.
Under the plea agreement, Brazil will receive 80 percent of Odebrecht’s fines, while the United States and Switzerland will garner 10 percent each.
Braskem, which is traded on the New York Stock Exchange through American Depositary Receipts (ADRs) and saw its shares jump 2.3 percent after the deal was announced. It will pay a criminal fine of $632 million, and another $325 million penalty to the US Securities and Exchange Commission.
Under the Braskem deal, Brazil will receive 70 percent of the fines, while US and Swiss authorities receive 15 percent. Sentencing for the firm has not yet been scheduled.
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