Brazil prosecutors focus on foreign firms after legal setback

285 companies have done business with people under investigation

CURITIBA, Brazil, (Reuters) — Brazilian prosecutors are increasingly turning their attention to bribery by foreign companies in the country's biggest-ever corruption case, a lead prosecutor said in an interview, adding that only one such company had signed a leniency deal so far.

Deltan Dallagnol, 35, a relentless anti-corruption advocate, said companies that bribed employees of state-run oil company Petrobras in exchange for contracts could see their executives jailed and face steep fines or bans from future contracts in Brazil.

"Foreign companies are becoming an ever-larger part of our investigation," the Harvard-educated Dallagnol said late on Tuesday in an interview from the southern city of Curitiba, where the top floors of the public prosecutors' building are draped with a huge "Corruption no!" banner.

Prosecutors have counted 285 foreign companies that have done business with people who are under investigation in the Petrobras probe, though they say that does not mean as many firms are being investigated.

The foreign focus illustrates both the strides the landmark investigation has made as it has rocked Brazil's political and business establishment but also its limits after the Supreme Court blocked prosecutors' pursuit of other state-controlled companies and government ministries.

That has prompted Dallagnol's team to refocus on contracts they say cost Petroleo Brasileiro SA, a tremendous source of public wealth which has seen its fortunes wane with falling oil prices, billions of dollars.

Prosecutors on Monday said they have evidence that Astra Oil, a unit of Belgian-controlled Astra Transcor Energy, paid $15 million in bribes to encourage Petrobras to buy part of Astra's Texas-based Pasadena Refining Systems Inc in 2006.

Astra Oil has not responded to requests for comment.

Dallagnol and his fellow prosecutors have so far won 75 convictions against former Petrobras executives and others who schemed to pay inflated prices to engineering firms who then used the proceeds to pay off executives and politicians through an elaborate network of black-market money changers.

The case has relied on 35 plea deals to help return more than 1.8 billion reais ($473 million) of stolen funds to public coffers to date, Dallagnol said.

He hopes foreign companies will sign similar deals, but said only one non-Brazilian firm has done so thus far. He declined to name the company.

While Rolls-Royce, which makes equipment for offshore oil and gas rigs, has said it is cooperating with the investigation, Dallagnol said the British engineering company has not signed a formal cooperation deal.

"I am referring to a written agreement in which the company promises to cooperate by opening its books, turning over information and evidence, and paying a fine," he said.

"The sooner they come, the better for them."

A Rolls-Royce representative declined to comment on the nature of its cooperation.

Dallagnol said his team is working with other countries so companies that sign leniency deals in Brazil will not face charges elsewhere.

Dallagnol said U.S. jurisdiction in the case is broad because of the frequent use of the U.S. banking system to pay bribes into offshore accounts.

That has helped Brazilian prosecutors find proof of bribes mentioned by collaborators, particularly when funds are hidden in less cooperative countries, he said.

NEXT STEPS

While prosecutors had previously hoped to target graft in contracts at state-run electric utility Eletrobras and even government ministries, Dallagnol and his colleagues have been limited recently by the Supreme Court's decisions to try those cases outside of Curitiba.

The country's highest court ruled a case involving the Planning Ministry should be tried in Sao Paulo. Supreme Court Justice Teori Zavascki then ruled on Oct. 30 that charges involving Eletrobras unit Eletronuclear should be seen by a judge in Rio de Janeiro, where the company is based.

Dallagnol said prosecutors had appealed Zavascki's decision. But given the court's precedent with the Planning Ministry, it seems unlikely the Curitiba prosecutors will get the case back.

They have agreed to collaborate with colleagues in Rio de Janeiro. But for the Curitiba prosecutors, who have spearheaded the landmark probe and see themselves as crusaders against corruption and impunity for the powerful, the venue change amounted to a big setback.

"There is no way the media and the public can focus on 20 different places. Depending how the case is divided, public opinion is going to dissipate and you lose its benefits," Dallagnol said.

The Petrobras investigation is far from over, he said. While dozens of engineering executives are on trial for corruption and money laundering, prosecutors in the first half of 2016 plan to charge them with forming a cartel.

Politicians accused of taking bribes can only be tried by Brazil's Supreme Court, but Curitiba prosecutors are considering a civil case against political parties that could require them to pay back ill-gotten donations, he said.

The case has ensnared many politicians from President Dilma Rousseff's governing coalition, including her Workers' Party and its main ally, the PMDB. Rousseff herself is not being investigated.

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