A Graft Machine’s Collapse Sows Chaos in the Caribbean
Hipolito Polanco was locked in a primary against President Danilo Medina in the Dominican Republic when he got a phone call from a number he didn’t recognize.
It was January 2016, and Polanco, a 39-year-old lawyer, was the last candidate still standing to challenge the president for the Dominican Liberation Party nomination. The voice on the phone was offering him a bribe and a high-ranking political position if he quit the race. “They asked me, ‘What’s your price?’” says Polanco. “They said they would arrange everything.”
The woman who called him, he says, was Monica Moura, the wife and business partner of Joao Santana, the president’s longtime adviser and a powerful political guru in the country.
Polanco says he refused her offer. But it provides a window into how one of Brazil’s largest companies and its intermediaries entwined themselves in Dominican national politics, just as they had in at least 11 other countries.
A month after that phone call, Moura and Santana hastily left the Dominican Republic. “I am sure that the coming elections will confirm victory for President and candidate Danilo Medina,” Santana wrote in a letter of resignation to the party’s leadership.
The next day, in their home country of Brazil, they were hauled off to jail. They would later be accused of playing a central role in a massive bribery ring run by the construction and engineering giant Odebrecht SA, and back in the Dominican Republic, Medina would go on to win re-election by a landslide.
In the year and a half since the couple’s arrest, investigations from Brooklyn to Brazil have uncovered a pervasive scheme in which Odebrecht used money to influence elections and bribed politicians and public officials to win billions of dollars worth of public work contracts in a dozen countries in Latin America and Africa.
The scandal, which began three years ago with a local money-laundering investigation in Brazil known as Lava Jato—Portuguese for Car Wash—has led to a record $3.5 billion in fines in the U.S. and has rattled governments from Mexico to Argentina. But few places beyond Brazil played so large a role as the Dominican Republic, a Caribbean tourist haven of 10.5 million which former executives depicted in court testimony as crucial to their plans.
In total, Odebrecht doled out $788 million in bribes from 2001 to 2016, it admitted in a settlement in U.S. federal court in December. At least $92 million of those were paid in the Dominican Republic, the second highest share after Venezuela’s, according to the settlement.
To carry out their bribes, Odebrecht executives set up three small offices and a conference room in the Dominican capital, according to Hilberto Silva, who oversaw the company’s bribery operation for a decade. He testified in Brazilian court that the Dominican Republic had everything it needed, and members of the bribery division would shuttle between a base in Miami and their offices in Santo Domingo. “The operation was based from there,” he said.
The Dominican attorney general’s office said late last month in its own investigation that Odebrecht money made it to at least a dozen prominent Dominican politicians, including a member of Medina’s cabinet, as well as lawmakers and state-owned company executives. So far, authorities there have charged 14 people with crimes ranging from accepting or distributing bribes to money laundering. They are awaiting trial.
Opposition politicians and anti-corruption groups, which have held massive street demonstrations in recent months, have seized on the arrests to call for an investigation into whether Santana used some of the money in his role as Medina’s campaign adviser. They accuse Santana of bribing lawmakers to back the 2015 constitutional reform that changed term limits to let Medina run for re-election and of using money to influence the presidential election itself. Medina has said his campaigns did not use any Odebrecht money.
“Santana was sent here as a political adviser to handle the dark side of the campaign with money that was supplied by Odebrecht,” Polanco says. “And Odebrecht won state construction projects and inflated the costs by millions.”
Odebrecht arrived in the Dominican Republic in the early 2000s, as one of several Brazilian construction companies expanding to the Caribbean. To help win its first contract, a $250 million job to build an aqueduct, the company hired Angel Rondon, a politically connected Dominican businessman with investments in everything from dairy companies to hotels, as a lobbyist.
Rondon, one of the 14 people charged late last month, opened dozens of businesses in the Dominican Republic, Panama, and the British Virgin Islands over the years, according to the indictment against him. And Odebrecht made roughly 100 transfers totaling more than $80 million to those companies over the last decade, in amounts ranging from $8,000 to $10 million. Most came from Meinl Bank, the Antigua-based bank in which the executives running Odebrecht’s bribery division had secretly bought a majority stake in 2010.
Rondon—who was known as the “bagman,” according to the indictment—allegedly funneled Odebrecht’s money to officials who, in turn, awarded Odebrecht projects to win contracts to build highways, dams, and other projects. In several cases, he allegedly convinced officials to approve changes to public-works contracts after Odebrecht had already won them, thereby boosting their value by millions of dollars. Along the way, according to the indictment, he kept a small percentage for himself and deposited millions in accounts held by his family members.
By the time Santana arrived in the Dominican Republic in 2011, Odebrecht was already firmly ensconced there. “Medina and the party had a long-standing relationship with Brazil’s Workers Party and presidents Lula and Dilma [Rousseff], and that’s how Santana was introduced and came to work here,” says Max Puig, a former top Liberation Party member who defected to run his own presidential campaign.
Santana was vital to Medina’s 2012 election win, devising catchy slogans plastered on billboards across the country. He and Moura ran their political consultancy, Polis Caribe, out of an orange and white Spanish-style house fronted by a black wrought-iron gate and surrounded by palm trees near a popular shopping mall in Santo Domingo’s wealthy Bella Vista neighborhood. They became known for producing slick videos and promotional materials, and Santana gained an international reputation as a political rainmaker, directing a half-dozen successful presidential campaigns across the region.
Despite that reputation, he remained little-known in tight-knit Dominican political circles. In private, however, Medina developed a deep trust of him and gave him direct access, Puig said. After Medina won in May 2012 with 51 percent of the vote, he praised Santana’s role, telling his party in an early June speech that Santana had “never doubted the possibility of our victory.”
As Santana worked his magic for clients, Odebrecht used his businesses as a cover for its bribes, Silva testified in a Brazilian court. The company poured millions of dollars into a Swiss bank account held by Santana's Panama-based front company, Shellbill Finance SA, which in turn funded election campaigns in five countries, according to testimony Moura gave.
Since 2001, Odebrecht has won 17 public works projects, worth nearly $6 billion, in the Dominican Republic. The most lucrative is a massive power plant that Medina has said is essential to solve the regular blackouts, bring down electricity costs, and help grow the country's $68 billion economy. The government put the coal-fired plant out for bid and received several proposals from international companies.
In the end, a consortium of companies including Odebrecht won the $2 billion contract. Construction began in 2014, and the consortium expects the plant to come online next year.
“The bid was written for Odebrecht,” says Angel Moreta, an attorney who represented IMPE, a consortium of Chinese companies that had also bid for the project. IMPE had offered to build the plant for $900 million, financed with low-interest loans from Chinese state banks, according to the company’s bidding documents.
Attorney General Jean Rodriguez said in a statement that his office had no evidence Odebrecht had illegally influenced the bidding process, but that at least two Dominican lawmakers had received bribes when Congress was considering how to pay for the project.
The collapse of the Odebrecht bribery scheme—including the arrests of dozens of executives in Brazil and billions of fines—has wreaked political and financial havoc for the Dominican Republic. After the scandal broke, Brazil’s development bank pulled its loan for the power plant, forcing Medina to scramble to come up with $900 million to finish it and set up a commission to review the bidding process.
Medina has said publicly that his campaign paid Santana for his work as a political adviser and did not accept any donations from Odebrecht. His office did not respond to requests for additional comment.
Moura said, in her own testimony in Brazil, that the presidential campaign in the Dominican Republic was one of the few in the countries where Odebrecht operated that it did not finance.
That testimony contradicted that of Silva and of her husband, both of whom have testified that Odebrecht funded Medina’s campaign.
Two years ago, Medina enjoyed higher public approval ratings than any other Latin American president. Today, those ratings are down, and he’s facing a case in the Inter-American Commission on Human Rights brought by Polanco, who says the presidential nomination process was tainted and wants a redo of the Liberation Party primary.
Polis Caribe, the consultancy that Moura and Santana founded, is still operating in Santo Domingo, tax records show. It’s now based out of another palatial house in another exclusive neighborhood, just a few blocks from Medina’s penthouse apartment.
—Sabrina Valle and Michael Smith contributed reporting.