Brazil: seeing the monster

Time for another quick trip down to Brazil.

We’ve reported earlier on the multibillion-dollar Petrobras scandal, which is making every American political scandal since Watergate – put together – look like a mere bagatelle. In recent months, as the investigation has widened, more and more top-level businessmen and politicians have been implicated in the kickback scheme centered on the country’s state-run oil firm.

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Dilma and Lula

And just as with Watergate, the net has reached ever higher. In just the past few weeks, authorities have raided the home of the beloved ex-president Luiz Inácio Lula da Silva (known popularly as Lula) and detained him for questioning, in response to which President Dilma Rousseff tried to name Lula as her chief of staff to protect him from prosecution – only to have the appointment blocked by a federal judge. Meanwhile, Rousseff herself has been drawn into the probe, leading to calls for her resignation or impeachment. In short, it’s looking very much these days like an endgame.

Brasil, Brasília, DF. 18/10/2005. O doleiro Alberto Youssef, operador do mercado financeiro que teria ligações com a corretora Bonus-Banval, depõe na sub-relatoria de Movimentação Financeira da Comissão Parlamentar Mista de Inquérito (CPMI) dos Correios, no Congresso Nacional, em Brasília (DF). - Crédito:JOEDSON ALVES/ESTADÃO CONTEÚDO/AE/Código imagem:161138
Alberto Youssef

Things have come a long way since March 2014, when, as David Segal of the New York Times reported in August, Alberto Youssef, described by Segal as “a convicted money launderer and former bon vivant,” sat in his jail cell and told two lawyers that about to reveal information to them that would bring down the Brazilian republic. As Youssef listed the names of the parties who, he claimed, had enriched themselves with Petrobras funds, the attorneys became increasingly aghast; one of them, Tracy Reinaldet, told Segal that “in Brazil, we know that corruption is a monster. But we never really see the monster. This was like seeing the monster.”

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João Vaccari Neto

In the case of Petrobras, the monster is many-headed one. So far over 100 indictments have been issued, several politicians arrested, and over a dozen companies sued. We’ve examined the cases of João Vaccari Neto, treasurer of the ruling Workers’ Party, and party hack Renato Duque, both of whom have been sentenced to long prison terms, the former for corruption and money-laundering, the latter for padding Petrobras contracts and transferring the excess take to party coffers.

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Joao Santana

We’ve discussed Joao Santana, Rousseff’s answer to Clinton campaign strategist James Carville, who was arrested for knowingly accepting payments from those illicit funds. And we’ve surveyed a number of others who’ve been nabbed for their roles in this massive scheme – among them, Paulo Roberto Costa, Petrobras’s former supplies director; Ricardo Pessoa, owner of UTC, a major construction company; and José Dirceu, Lula’s ex-chief of staff. Then there’s a couple of guys who turned state’s evidence: former Petrobras manager Pedro Barusco, who admitted he’d pocketed almost $100 million in dirty money, and businessmen Julio Camargo, who confessed to paying Petrobras $4.5 million in bribes.

But these names are just the tip of the iceberg. Several other big shots from both the public and private sector have also gone down, some of them since our previous look at this debacle. We’ll spend the rest of this week making their acquaintance.

A desperate move in Brazil

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Joao Santana

On February 23, as we noted yesterday, Joao Santana, the James Carville to Dilma Rousseff’s Bill Clinton, was unceremoniously arrested in connection with the massive police probe into price-fixing, bribery, and kickbacks at Petrobras, the Brazilian state petroleum firm. Only six days later, Brazil’s justice minister, Jose Eduardo Cardozo, resigned. Why? Because he, too, had been implicated the corruption? No – because members of the ruling Workers’ Party were furious at him for having failed to put an end to the corruption investigation, known as Operação Lava Jato (Operation Car Wash). Cardozo, a veteran member of the Workers’ Party who has previously served as congressman and mayor of São Paulo and who has long been counted as a “close and reliable friend to the president” and as one of her “most faithful champions,” was the second member of Rousseff’s cabinet to leave in recent months; the first was Joaquim Levy, who resigned in December from the position of Minister of Finance.

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Jose Eduardo Cardozo

Cardozo’s resignation came in the wake of news that the probe had broadened to included none other than Luíz Inácio Lula da Silva, Brazil’s widely revered ex-president, who was in office from 2003 to 2010. According to reports, courts were on the verge of subpoenaing Lula’s financial records. Cardozo’s refusal to interfere in police efforts – and thus keep the damage from spreading to more and more fellow Workers’ Party members – spelled the end of his tenure at the Ministry of Justice. Although Brazilian police are technically under the ministry’s authority, the Minister of Justice has no legal authority to interfere with their activities.

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Rousseff and Lula in happier times

Operation Car Wash has already taken down a long list of top business leaders and Workers’ Party politicians. But as the probe closed in on Lula, the panic in the circles surrounding Rousseff intensified – as did outrage at Cardozo for failing to rein in what loyalists insist on describing as a political witch hunt. Lula, who had already been confronted recently with questions from the police about his children’s shady financial activities, is now being scrutinized over renovations performed at two of his properties, a luxurious beach-front apartment and a rural estate. The renovations were performed by construction firms implicated in the Petrobras corruption; Lula insists, however, that the two properties don’t belong to him.

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Wellington Cesar

Is Cardozo totally out of the government? Far from it. In a neat twist (leave it to corrupt autocrats to come up with moves so rich in poetic irony), he’s been shifted to the job of Attorney General – a position in which he’ll be tasked with protecting Rousseff & co. from the very same investigators who’ve been allowed to proceed with their work under his authority. Meanwhile, Cardozo’s replacement at Justice, one Wellington Cesar Lima e Silva, is expected to lean on those investigators to lay off Lula – and, of course, the president herself. 

It’s looking likelier by the day, however, that any efforts to fend off the fuzz may be in vain. On March 1, the media reported on a plea bargain in which eleven officials of Andrade Gutierrez, Brazil’s second-largest engineering firm, admitted to having paid over $1.27 million under the table to suppliers for Rousseff’s 2010 campaign. As Reuters put it, this testimony represented “the first direct link between the widening ‘Operation Carwash’ investigation into bribes and political kickbacks at state-run oil company Petrobras and the election of Rousseff.”

The sands are shifting fast in Rousseff country. Stay tuned. 

 

Brazil: another crisis for Rousseff

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Dilma Rousseff

Last September, as we reported on this site a while back, two top members of Brazilian president Dilma Rousseff’s posse were sentenced to long prison terms. João Vaccari Neto, treasurer of the ruling Workers’ Party, got more than 15 years for corruption and money-laundering; another party hack, Renato Duque, got 20 years for inflating oil contracts and shoveling the excess profits into the party’s coffers. The convictions of these two men were only part of a large-scale disaster – a blend of scandal and economic crisis – that sent Rousseff’s popularity ratings south, making her, in the words of the Financial Times, “Brazil’s most unpopular president in recent democratic history.”

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Joao Santana

Then, on February 23, just as Rousseff’s numbers were starting to recover and she seemed to be emerging from under the cloud of possible impeachment, yet another member of her inner circle was put under arrest. Joao Santana, a journalist and political strategist, was the mastermind behind her two election victories and is one of Rousseff’s more intimate friends and advisers – the James Carville to her Bill Clinton. In addition to engineering her victories, he’s also successfully coordinated campaigns for leftist presidential candidates in the Dominican Republic, Angola, Peru, and – notably – for both Hugo Chávez and Nicolás Maduro in Venezuela.

According to the charges leveled against him, Santana knowingly allowed himself to be paid for his services to the Rousseff campaign with several million dollars in funds illegally diverted from Petrobras, the state oil company that is currently at the center of Brazil’s biggest corruption scandal ever. Santana’s homes and offices were raided by 300-odd officers; his wife was also taken into custody. The arrests reportedly came as a shock to Rousseff’s supporters, who fear that Santana may work out a plea bargain with prosecutors in which he throws Rousseff under the bus.

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Michel Temer

Even if Santana doesn’t turn state’s evidence, to be sure, the goods the cops have on him may be more than enough to sink Rousseff. If it’s proven that she paid Santana with money pilfered from Petrobras, it could mean the official overturning of her election victory. The Portuguese language has a lovely word for this act of invalidation: cassação. As Americas Quarterly staffer Stephen Kurczy recently explained, impeaching Rousseff would involve action by both houses of Congress – which in early December, in fact, initiated impeachment proceedings, only to see them stall shortly therafter. (The proceedings will supposedly resume soon.) Cassação, by contrast, is a process that only requires a ruling by Brazil’s electoral court, the Tribunal Superior Eleitoral – which, as it happens, is already investigating the funding of Rousseff’s 2014 campaign as part of Operação Lava Jato (“Operation Car Wash”), the probe into corruption at Petrobras. If the court determined that Rousseff and her vice president, Michel Temer, had funded their election campaign with illegal funds, both Rousseff and Temer could be removed from office at once, with Rousseff being temporarily replaced by the Speaker of the House, Eduardo Cunha, until a new election could be arranged.

“We’re on the border of changing eras in Brazil,” political consultant Thiago de Aragão told Kurczy. “Until recently, anyone involved in the PT [the Workers’ Party] was immune. Now people are discovering that it’s not like this. The times are changing.” In fact, they’re changing fast. Only days after Santana’s arrest, another Rousseff intimate suddenly resigned his cabinet position. Tune in tomorrow.