Brazil's `Michael Corleone' Accused in Spiraling Sleaze Scandal

Cachoeira -- a businessman known in the international press as "Charlie Waterfall" -- has been in prison since March, accused of running illegal gambling operations and other offenses. (He denies the charges.)

But police say phone conversations recorded during the gambling investigation revealed suspicious links between Cachoeira and members of Congress from numerous political parties, high-ranking officials, state governors and the construction company Delta Construcoes S/A, which since 2007 has won more government contracts than any other.

Cachoeira's political gopher, police charge, was an opposition senator named Demostenes Torres, previously known for his anti-corruption stance. Brazil's prosecutor general alleges that Torres received about $1.7 million from Cachoeira's group for political favors -- including interfering with regulators and investigators on Cachoeira's behalf, and giving protection to his gambling business. (Torres also denies all charges.)

The police also allege that Delta Construcoes worked with Cachoeira's group to get government contracts, and that both Cachoeira and Torres were silent partners in the company. Delta owner Fernando Cavendish has stepped aside temporarily as chief executive, and the company has pulled out of two high-profile contracts in Rio: the renovation of Maracana stadium, where the 2014 World Cup final will be held, and a key highway project. Delta has denied involvement in the scandal and promised to cooperate with investigators.

A parliamentary inquiry commission (known as a CPI) is investigating the case.

A blog by Wellington Froes, a legal academic and columnist in Goias state, where Cachoeira based his operations, illustrated the feelings of many when he published a cartoon in which a small boy asks his father: "Who runs this country?" His father doesn't look up from his newspaper. "A guy named Carlinhos Cachoeira," he replies.

Letacio Jansen, a former Rio de Janeiro state prosecutor, described Cachoeira on his blog as "Our Michael Corleone." He wrote:

Carlinhos Cachoeira was born, according to newspapers, in a family of bookies … When he became a bingo businessman and, on the other side, the owner of legal companies (in the pharmaceuticals industry, among others) he demonstrated his intention, at first, to disengage himself from the family tradition, like Al Pacino's famous character in the Coppola film. His mistake was wanting to do politics.

Many were quick to score political points from the episode. Former Rio de Janeiro state Governor Anthony Garotinho published photos on his blog of Cavendish consorting with the state's current governor, Sergio Cabral, and other officials at a party in Paris in 2009.

In a column for the O Globo newspaper, Ricardo Noblat reproduced the photos and noted that Delta had gained about $775 million in state contracts under Cabral's government:

Some of the contracts were given to Delta without the company even putting in bids. Delta does work in all states -- but none did so well as Rio.

Guilherme Fiuza, in a scathing column for Epoca magazine, linked "Cachoeira Gate'' to the "Mensalao" case in 2005, in which lawmakers were allegedly given monthly payments by the ruling party to vote for favored legislation. That scandal almost brought down the government of former President Luiz Inacio Lula da Silva. (Lula has consistently denied the charges; the Supreme Court is scheduled to rule on the case this year.)

Fiuza took aim at Marcio Thomaz Bastos, a former justice minister in Lula's government who is now Cachoeira's lawyer:

This route was opened precisely by the government in which Thomaz Bastos served … Compared to the monthly allowance scheme for deputies, which became known as the 'Mensalao,' the internal organization of Cachoeira is a child's toy. The good news for the market of buying and selling legislators is that, seven years after the Mensalao, nobody was punished.

The Estado de Sao Paulo also saw parallels:

Brazil already lost, in the Mensalao scandal in 2005, an excellent opportunity to go deep in the fight against corruption in public life. The deliberate omission and complicity of government officials and politicians, including the opposition, allowed the main culprits of the scandal to come out unscathed -- except those who are still at risk of being condemned by the Supreme Court -- and even strengthened their polls to the point that they felt confident in defining the episode as a `farce.'

U.S. Secretary of State Hillary Clinton recently said Brazilian President Dilma Rousseff had created a "global standard" in transparency and the fight against corruption. But former President Fernando Henrique Cardoso, in an interview in Folha, argued that both corruption and transparency had increased under Rousseff:

"With Brazil's enormous capitalism and extensive government interference, there are a lot more business opportunities."

In other words: more money, more systematic sleaze. Cardoso might have added that Corleone-like corruption is as deeply rooted in Brazilian political and business life as samba and soccer are in its social life. Corrupt businessmen can only expand their influence with bribes as long as there are officials willing to accept them.

(Dom Phillips is the Rio de Janeiro correspondent for World View. The opinions expressed are his own.)

To read more from World View, Bloomberg View's emerging markets blog, click here.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

    To contact the author of this story:

    To contact the editor responsible for this story:
    Timothy Lavin at

    Before it's here, it's on the Bloomberg Terminal.