Carwash at Three Years Moves From Brazil Ground Zero to Diaspora

  • Cases spread to higher courts, different states and countries
  • Local investigator begins to pack his office for newer crimes

One floor above the jail cell that’s been holding Brazilian construction magnate Marcelo Odebrecht for the past 21 months, Marcio Anselmo, the man who put him there, is about to pack up his office and move on.

It’s been three years now since the so-called Carwash investigation exploded onto the Brazilian scene and screens, its fuse lit in the southern city of Curitiba by Anselmo and his colleagues.

Marcio Anselmo

Photographer: Heuler Andrey/AFP via Getty Images

"Carwash is far from over, but my job here is almost done,” Anselmo, 39, says as police circulate through his office with paperwork for the biggest investigation still pending from Curitiba: the corruption case against former President Luiz Inacio Lula da Silva. One of Brazil’s most popular -– and controversial -– political leaders, his case is expected to conclude in the local federal court later this year.

Most of the main Carwash investigations within Curitiba’s jurisdiction are wrapping up, moving on to higher courts and spreading to different states in Brazil and to other countries in Latin America and in Africa -- spurred on by the so-called "end of the world’’ plea bargain testimony in the past months from 78 Odebrecht executives involved in Carwash, including Marcelo Odebrecht’s.

"For a long time, it never crossed our minds that the investigation would go this far," Anselmo said. "And it is still hard to predict where this will end."

More than 200 people have been charged by local federal judge, Sergio Moro. For more than a decade, Moro has been working closely with the same police officers and prosecutors who have made up part of the Carwash task force since 2014.

Read more on Brazil and the Carwash scandal via Bloomberg QuickTake here.

That group of young investigators, some of whom specialized in financial-crime studies at such universities as Harvard and Cornell, have identified 6.4 billion reais ($2.09 billion) in bribery payments at the heart of the scandal, mostly from 16 construction companies, including Odebrecht. Along with top executives at state oil company Petrobras, politicians and money launderers, those firms have been swept up in an investigation that is now spilling across borders and poised to leave its mark on economies across the region.

Peru, Colombia, Panama and the Dominican Republic are the most vulnerable to lasting economic fallout from the dragnet because construction projects have a more direct financial impact, according to a report last month from the Eurasia Group consulting firm.

“Leaks will still continue to generate headlines over the course of the year, and governments have little ability to control the information since it is coming from abroad,” Eurasia’s Christopher Garman says.

Name Recognition

Just having one’s name connected to Odebrecht and Carwash is enough of a stain on reputations to constitute part of the punishment for Brazil’s top officeholders, Carlos Lima, the strategist of the Curitiba federal prosecutors, said in his office in a modern glass building in the city’s downtown.

And just stigma might have to suffice for a while. While Moro has charged hundreds and sentenced more than 80 in Curitiba over the past three years, the Supreme Court has turned only five sitting politicians into defendants and has issued no sentences.

Brazil’s prosecutor-general, Rodrigo Janot, presented a second list last week to the top court of another 83 cases he wants investigated. The politicians on the list include six ministers of President Michel Temer’s government; former Presidents Lula and Dilma Rousseff; the heads of Senate and Lower House; and leaders from the opposition. Janot’s first list came two years ago, at Carwash’s first anniversary.

Rousseff has denied wrongdoing, and Lula has declined to comment.

Burning Sensation

Incumbent parties also are likely to be singed by their connections with the firm, Eurasia says. In Brazil, where Temer runs an already fragile government that shoulders an approval rating of 10 percent, corruption allegations were among the main reason why six ministers stepped down within 10 months of the start of his term.

The president himself had to explain his request for a donation from Odebrecht; Temer has acknowledged the request but denies wrongdoing. Sergio Cabral, the former governor of Rio state, sits in an overcrowded, rat-infested prison there, a few cells away from Eike Batista, once Brazil’s richest man, both courtesy of Carwash.

Cabral has denied wrongdoing, and Batista has said he would collaborate with investigators.

Brazil’s Supreme Court, overwhelmed by thousands of other cases stretching from abortion to gun control, could require five or six years -- “in an optimistic scenario," Anselmo says -- to rule on sitting politicians.

Supreme Privilege

That’s because, by law, they’re the only ones who can. It took the Supreme Court eight years to rule, in 2013, on the Mensalao scandal, the first time Brazil convicted a group of top politicians for corruption.

“If there are any convictions by the Supreme Court this year, they will be very few,” Lima says. “It should take long."

Thus the sense of endlessness that hangs over the sentiment of investors and the public as Year 3 moves into Year 4. When once Moro and his crime fighters were lionized in the media for their intrepid assault on corruption in the highest corridors of power, Carwash-fatigue has emerged.

Brazil’s recession -- its worst in a century -- and the probe’s derailment of so much of the construction industry, aren’t helping. The 5.2 percent slump in construction from 2015 to 2016 played a large role in Brazil’s 3.6 percent economic contraction in 2016.

"Things just got worse in the country,” says Bruno Braga, 23, who started his civil engineering career at Odebrecht and is now driving cars for Uber. He lost his job at the construction company after its work at Tom Jobim International Airport in Rio de Janeiro ended and new projects dried up.

The Price of Corruption

"Politicians always get away with it, and we get to pay the price for all the corruption,” Braga says.

Lima, the prosecutor, noting the expanse and pervasiveness of the alleged corruption, says the task force will lobby this year for the end of the legal privileges that allow Brazilian sitting politicians to be charged only by the Supreme Court.

“The people wanted to believe the problem was with one single party,” Lima says. "The truth is much uglier, which creates a strong feeling of helplessness."

Traveling Abroad

Still to come is the expected overseas expansion of the investigation. Odebrecht admitted in December to the U.S. Justice Department that it paid $788 million in kickbacks for contracts in 12 countries. This month, an Odebrecht executive in Brasilia, Hilberto Silva, said in a leaked testimony that the company had moved more than $3 billion from 2008 to 2014 through a department dedicated to making bribes.

The overseas component of Carwash may trigger admissions and settlements from more world-class companies with good compliance records that may have played along in the bribery scheme.

Presumably those still facing implications don’t want to go down the way Marcelo Odebrecht did, wearing gym clothes and a look of utter astonishment when the billionaire was placed under arrest at his mansion on a cold Friday morning in June 2015. Even though three vehicles’ worth of agents had been searching his home for hours, and even though a dozen of his peers from some of the country’s largest builders had already been jailed, Marcelo Odebrecht’s expression reflected a certainty that he couldn’t be punished, Anselmo said in the office he’s about to vacate.

He’ll be taking over the federal police department in the state of Espirito Santo. 

Carwash will go on.