Four executives with one of the largest construction firms in South America, Camargo Correa, were arrested by Brazilian police on March 25 in connection with a yearlong corruption probe. In all, 10 employees of the firm were arrested as federal police carried out a series of raids on the company’s offices in Sao Paulo and Rio de Janiero. The operation was part of an investigation named Operation Sand Castle.
Investigators with Brazil’s federal prosecutor’s office specializing in financial crimes say Camargo Correa was laundering money through fake companies and illegal currency traders. In addition the firm is accused of making millions of dollars in illegal campaign contributions to various political parties.
The São Paulo-based firm is a privately held holding company with divisions for engineering and construction, cement, textiles and steel, real estate and even clothing goods. The firm recorded more than $7 billion in revenue last year. Its operations span more than 20 countries worldwide, employing more than 57,000 people.
The construction division is noted for handling major infrastructure projects such as hydroelectric dams. Camargo Correa was the principal contractor for the 14,000-MW Itaipu hydroelectric dam. Sited on the border between Brazil and Paraguay, it is the world’s second-largest dam in terms of electricity -eneration capacity.
Camargo Correa officials declined to comment beyond releasing a statement stating the firm was “perplexed” by the investigation. The company claims it has complied with all legal standards in doing business. A spokesman criticized the investigation for damaging the firm’s image and making its employees and associates “ill at ease.”
Prosecutors allege that Camargo Correa used a network of fake companies and illegal currency traders to transfer millions of dollars abroad. Authorities began the investigation in January 2008 after an anonymous complaint was sent to Brazil’s Public Ministry, the country’s prosecutorial body.
Court-approved wiretaps of Camargo Correa’s offices revealed the kickback scheme in calls made between July and October of last year. According to prosecutors, company officials tried to avoid detection on wiretaps by using Internet phone services as well as encrypted lines.
On March 25, Brazil’s state-owned oil company, Petroleo Brasileiro SA, also known as Petrobras, suspended payments to Camargo Correa in connection with the construction of the Abreu e Lima refinery project in Pernambuco state.
Prosecutors alleged that Camargo Correa overcharged for the work and a federal court subsequently ordered Petrobras to stop paying the construction firm. The oil company released a statement saying it was complying with the court order but planned to contest the allegations of misappropriation of funds. The situation has delayed the completion of the project for at least a year and could double the $12.5-billion cost of the project, according to Petrobras.
The arrests have ignited concerns of misuse of more than $5.5 billion in stimulus funds that Brazil has committed in hopes of revitalizing its lagging economy. Camargo Correa has been one of the largest recipients of such funds, taking in more than $100 million last year for various infrastructure projects.
Last month, a consortium that included Camargo Correa obtained a $3.2-billion loan from the agency to finance the construction of the 3,150-MW Jirau hydroelectric plant on the Madiera River in the Amazon basin.
Brazil has been racked by multiple corruption scandals in recent years, and construction firms have been a target of several investigations. One of the largest scams was uncovered two years ago when a well-known construction company, Gautama, was revealed to be at the center of a corruption scheme that involved more than $87 million in bribes to public officials.
Almost every senior executive of the company was charged in the scheme as well as a state deputy, a former state governor and a host of federal and state employees. The country’s mines and energy minister was forced to resign after being implicated in the scandal.