Odebrecht and Financier Settle on Project Bribes
In a Sept. 4 settlement with the Inter-American Development Bank, Brazil-based construction giant Odebrecht SA has agreed to pay $50 million to charities and will face some debarment on bank-financed work related to corruption on a highway construction program in Brazil and a hydroelectric power plant project in Venezuela, both bank funded.
According to a bank announcement, its independent internal watchdog found evidence of bribes after an investigation.
It added that Odebrecht “does not contest” evidence that the firm “made payments to public officials” related to award, terms and execution of project contracts. These equaled at least 5 to 6% of each contract amount, said the bank.
Bank investigators found that on the power plant project, “between 2007 and 2015, illicit payments and transactions of up to $118 million were made [involving] a complex network of agents and offshore financial payment schemes,” the bank said.
The firm did not respond to an ENR inquiry for comment by post time.
The bank approved 208 loans and guarantees totaling $14.2 billion in Latin America and the Caribbean last year, compared to 201 loans and guarantees that totaled $13 billion in 2017, according to its latest annual report.
As part of the settlement, CNO SA, a subsidiary of Odebrecht, will be debarred from IDB-funded project bidding for six years, the bank said.
But a key unit, Odebrecht Engenharia e Construção S.A. (OEC), faces only a “conditional non-debarment” for ten years that will allow it, and any of its own subsidiaries, to bid on IDB-financed projects if they “fully meet” settlement terms. CNO also has four years of this condition following its debarment period.
OEC ranks at No. 131 on ENR's list of the Top 250 Global Contractors, reporting $2.02 billion in global construction revenue, including $1.6 billion outside of Brazil. The firm had ranked at No. 96 on the 2018 Top Global Contractors list.
The charity donations, to be made to non-governmental organizations (NGOs) and others related to social projects and “quality of life” improvements for communities at risk in IDB member countries, won’t begin until 2024.
The bank said the reduced debarment stems from “Odebrecht’s continued cooperation,” including its own internal probes and independent compliance monitoring.
The agreement is the latest made by the firm related to the “Operation Car Wash” bribery scandal that implicated numerous contractors and government officials in 12 countries, including Brazil and the U.S. It has committed to a $2.6-billion compensation package to those countries and Switzerland. The World Bank debarred Odebrecht in January for three years on its funded projects.
The firm filed in June for bankruptcy protection and reorganization in Brazil—possibly the largest debt-protection filing ever in Latin America—and also filed last month for recognition in the U.S. of that proceeding under Chapter 15 of the U.S. bankruptcy code, which will provide some protection from creditors as it restructures more than $25 billion of debt.
Odebrecht sued the government of Colombia last year for about $780 million related to project assets there the firm claimed were appropriated after work was halted during the probe of bribe schemes.
But an arbitration ruling last month said the country must pay $61 million to several bank lenders only, with the firm not awarded any funds, according to Reuters.