Four executives with one of the largest construction firms in South America, Camargo Correa, were arrested by Brazilian police Wednesday in connection with a year-long corruption probe. A total of ten 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 — 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 Sao Paulo-based firm is a privately-held holding company that has divisions for engineering and construction, cement, textiles and steel, real estate and even clothing goods. The firm tallied more than $7 billion in revenues last year with operations in more than 20 countries worldwide employing more than 57,000 people.
On Thursday officials with Camargo Correa declined to comment beyond the information in a statement released the day prior stating the firm was “perplexed" by the investigation. The company’s claims it has complied with all legal standards in doing business and criticized the investigation for damaging the firm’s image and making its employees and associates “ill at ease."
The four company executives arrested Wednesday were Fernando Dias Gomes, executive director of audit and control; Darcio Brunato member of the control board; Raggi Badra Neto director of the public works division and Pietro Francisco Bianchi, a retired engineer working with the firm as a consultant.
Four other associates were apprehended as well as two secretaries for the directors who were taken into temporary custody.
Prosecutors allege that Camargo Correa utilized through fake companies and illegal currency traders to transfer millions of dollars abroad. Company officials tried to avoid detection on wiretaps by suing internet phone services such as Voip and Skype as well as encrypted lines. A complex code using names of animals was used to disguise payments on official records, prosecutors said.
Prosecutors said one of the shell companies used to send more than $20 million in remittances abroad under the guise of payments to suppliers consisted of nothing more than a small building on a dirt road outside of Rio de Janiero.
On Wednesday, 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.
Proesecutors allege Camargo Correa overcharged for the work and a federal court 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 Petrobas.
The investigation began in January of last year after an anonymous complaintant contacted Brazil’s Public Ministry, the country’s prosecutorial body. According to the Brazilian news magazine EPOCH, a series of court-approved wiretaps of the company’s offices revealed the kickback scheme in calls made between July and October of last year — just prior to municipal elections.
At least one Brazilian official, Senator Agripina Maia, has been identified in connection with the probe. While confirming to The State newspaper of Sao Paulo that he received $300,000 from the company, he claims it was through legal donations to his campaign.
The arrests have ignited concerns of misuse of more than $5.5 billion in stimulus funds that Brazil has begun spending 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 in such funds for various infrastructure projects last year.
Last month, a consortium including 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 major investigations. One study in 2006 by Control Risks and Simmons & Simmons found that 43 percent of Brazilian firms believed their companies had failed to win a contract, or gain new business, because a competitor had paid a bribe in the previous five years.
One of the largest recent schemes in Brazil was uncovered two years ago when a well-known construction company, Gautama, was revealed to be in the center of a corruption scheme that involved more than $87 million in bribes to public officials.
Almost every 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 Brazil’s mines and energy minister, Silas Rondeau, was forced to resign after being implicated.
According to investigators, Gautama obtained public funds for fraudulent and sometimes non-existent projects and then kicked back the proceeds.