- Justice Department, SEC said to mull case against oil giant
- U.S. scrutinizing companies named in Brazilian investigation
U.S. authorities are investigating more than a dozen companies as part of an international bribery probe that has already led to more than 150 arrests in Brazil, according to people familiar with the matter.
Prosecutors in the U.S. and Brazil are effectively dividing the investigation to suit their respective strengths as they pursue suspected graft related to Brazil’s state-run oil giant. Brazilian law allows authorities to file criminal graft charges against people but not companies, whereas the U.S. has been more successful pursuing companies accused of corruption.
The U.S. Justice Department and Securities and Exchange Commission have been speaking with their Brazilian counterparts and gathering information from companies, said three people who spoke on the condition of anonymity. The U.S. is hoping the exchange of documents and other information will allow it to mount a case against Petroleo Brasileiro SA, known as Petrobras, and companies that it had contracts with, two of the people said.
“There is certainly coordination ratcheting up between the Brazilians and the U.S.,” said Eric Snyder, a partner at Jones Day who represents Brazil-based individuals and companies in the U.S. He is not involved with either government’s investigation, and he declined to say if any of his clients were being looked at. “My understanding, my belief, is that it’s probably turned from being Brazilians requesting bank account information from the U.S., for instance. Now it’s going the other way.”
An SEC spokeswoman, Judy Burns, declined to comment. Peter Carr, a Justice Department spokesman, declined to comment.
The intensified scrutiny of companies linked to Petrobras inserts the U.S. more heavily in investigating the scandal known as Operation Carwash, which Brazilian prosecutors have tracked across four continents. It has toppled construction chiefs, helped tip the country into recession and ensnared key members of President Dilma Rousseff’s inner circle, including members of her Workers’ Party.
Rousseff, who was chairwoman of Petrobras when some of the kickbacks occurred but hasn’t been accused of any wrongdoing in the scandal, was suspended from office in a Senate vote Thursday on allegations she doctored fiscal accounts to mask the size of a budget deficit. She now faces an impeachment trial in the Senate.
Rousseff pledged Thursday to use all legal instruments in her defense, reiterating that she committed no crime and that the impeachment process amounted to a coup that is a threat to Brazil’s democracy.
Brazilian prosecutors investigating Operation Carwash -- named after a service station used to launder money that was identified early in the investigation -- say contractors for Petrobras bribed executives of the company in exchange for lucrative contracts and then inflated the costs. Petrobras has said it has improved its compliance standards and has fully cooperated with the investigations.
The Justice Department’s stepped-up corruption investigation marks a shift from two years ago, when the graft scandal broke into public view.
Although the Justice Department and SEC opened their investigations in October 2014 with a focus on Petrobras, much of the work early on was done by Brazilian investigators, a person familiar with the situation said at the time. The wider examination of companies that had dealings with Petrobras started more recently, people familiar with the matter said.
Prosecutors from the Justice Department’s foreign corruption unit have been assigned to various pieces of the probe, two of the people said, and are working with the U.S. Attorney’s Office for the Eastern District of Virginia and the SEC on a possible case against Petrobras.
Trading in U.S.
U.S. authorities are looking at any company that has been named publicly in the Brazilian investigation, two of the people said. Those include builders Odebrecht SA, OAS SA and Andrade Gutierrez SA. Executives from all three companies were convicted or pleaded guilty in the scandal. Centrais Eletricas Brasileiras SA, known as Eletrobras, has also been mentioned and a former executive has been arrested.
These companies have shares or bonds that trade in the U.S., allowing American authorities to claim jurisdiction.
Petrobras and Eletrobras’s press offices said they couldn’t immediately comment. Press officials and attorneys for Andrade, OAS and Odebrecht didn’t reply to e-mails and phone messages seeking comment.
The Justice Department is also tracking money from the bribery schemes for signs that it may have passed through the U.S. financial system, another person said.
SBM Offshore NV, a Dutch-based oil and gas company, is also getting another look by U.S. prosecutors after the U.S. cleared it of corruption allegations in 2014, the two people said. At the time, SBM said in a statement it would pay $240 million to Dutch authorities and take remedial measures, without admitting wrongdoing, to settle bribery allegations involving Brazil and two other countries.
A company representative, responding to a request for comment, referred to remarks made on May 2 by Bruno Chabas, SBM’s chief executive officer. “We are not being prosecuted; that’s the only thing we can say for sure,” Chabas said.
Scrutiny of Contractors
Brazil informed the U.S. last year that it believed an additional four companies paid bribes to win contracts from Petrobras, Carlos Lima, a Brazilian prosecutor, said in June. Those companies are units or affiliates of Samsung Heavy Industries Co., Skanska AB, AP Moeller-Maersk A/S and Toyo Engineering Corp.
A Maersk representative said the company has found no indication that employees breached company rules against offering bribes and said it is cooperating with Brazilian authorities. Representatives for the other companies didn’t respond to e-mailed requests for comment.
A case against public companies such as Petrobras could be brought in Virginia because filings with the SEC are sent to a server located in the state, said Charles Connolly, a former federal prosecutor. That nexus has allowed prosecutors to bring cases against non-U.S. companies under the Foreign Corrupt Practices Act, such as one against French oil company Total SA in 2013, said Connolly, who isn’t involved in the Petrobras matter. Total SA paid $398 million in penalties to settle bribery allegations.
“It allows the Department of Justice on a securities fraud theory to get venue over a company whose ties to the U.S. are the filings it makes,” said Connolly, a partner at Akin Gump Strauss Hauer & Feld LLP in Washington.