An uphill struggle to vanquish graft in Petrobras
Five years after Brazilian prosecutors exposed a long-running bribes-forcontracts racket at state-run oil firm Petrobras, the company is proclaiming it has cleaned up its act. It has run TV spots touting its whistleblower hotline as well as a compliance department created in the wake of Brazil’s epic “Car Wash” corruption scandal, which damaged the oil giant, helped tip Brazil into recession and landed a former president behind bars.
In late November, citing progress it had made in rooting out graft, Petrobras closed down a special committee constituted in 2014 to aid investigations into corruption.
But interviews with six people with direct knowledge of the company’s graftbusting efforts, including former Chief Compliance Officer João Elek Jr, paint a picture of an organisation still struggling to root out bad behaviour.
These individuals said Petroleo Brasileiro SA, as the firm is formally known, has strengthened its internal watchdog processes significantly.
However, Elek and the others cited a series of obstacles that have hampered the firm’s attempts to stamp out corruption. Among them, the people said, is an investigations unit which at times has been severely understaffed.
In addition, the people said, bureaucratic hurdles for dismissing anyone at the state-owned company, along with unwillingness by many employees to cooperate with compliance investigators, means Petrobras in some cases has left it to law enforcement to gather needed proof of wrongdoing.
“There was great cultural resistance” to graft probes, said Elek, who led the Petrobras compliance department from January 2015 through April 2018. A former AT&T Inc executive, Elek described his departure from Petrobras as amicable and said it was never meant to be a long-term post.
All six people were directly involved in designing or implementing Petrobras compliance programmes in recent years. Four still work on Petrobras compliance issues. In a detailed statement, Petrobras vigorously denied that compliance investigators have faced significant internal obstacles. It said it has “zero tolerance” for corruption and that it is committed to “immediate interruption” of misconduct.
But the company’s ongoing troubles, the people said, were on full view in December with the bombshell indictments of six former and current Petrobras employees. The workers stand accused of taking kickbacks in the latest phase of Car Wash, this one centred on irregularities in the company’s oil trading division from at least 2011 to 2014.
Petrobras was alerted to potential problems in its trading operation since at least 2014, when a whistle-blower went public with claims that the energy giant was overpaying for some of its oil purchases.
The alleged scheme was also cited by two former Petrobras executives and a former senator in subsequent plea deals with prosecutors.
But Petrobras did not move quickly to investigate suspicious activity, identify potential suspects and sideline them, the people said.
Five of the workers indicted in December had already left Petrobras by the time authorities issued their charges.
The sixth, a Houston-based trader named Rodrigo Berkowitz, was still on the payroll when prosecutors issued a warrant for his arrest on Dec. 5. Petrobras fired Berkowitz the same day. The alleged scheme may have been ongoing through the time of his dismissal, police inspector Felipe Pace said at the time.
Berkowitz did not respond to multiple requests for comment. His lawyer confirmed he had agreed to plead guilty in the United States to conspiracy to commit money laundering. Berkowitz is now cooperating with US authorities investigating the alleged oil trading scheme, people familiar with the matter said. Legal representatives for the other five people indicted did not respond to requests for comment.
PETROBRAS WAS ALERTED TO POTENTIAL PROBLEMS IN ITS TRADING OPERATION SINCE AT LEAST 2014, WHEN A WHISTLE-BLOWER WENT PUBLIC WITH CLAIMS THAT THE ENERGY GIANT WAS OVERPAYING FOR SOME OF ITS OIL PURCHASES.