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Julie DiMauro Contributing Editor

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FCPA Blog Daily News

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Monday
Apr132015

Brazil: Will oil company graft crush Dilma?

Hundreds of thousands of Brazilians poured into the streets this weekend to protest against corruption, accusing the ruling Worker's Party of bribery at the state-owned oil giant Petrobras.

An estimated 700,000 protesters called for impeachment of President Dilma Rousseff. She was Petrobras' chairwoman from 2003 to 2010. She denies involvement in any graft.

After massive protests in March, President Rousseff issued an anti-graft decree. But with the Petrobras scandal still growing, that hasn't satisfied the demonstrators.

Last month, the Swiss attorney general issued an order to freeze $400 million of assets allegedly tied to corruption at Petrobras. The OAG said it uncovered over 300 accounts at about 30 Swiss banks that were “apparently used to process the bribery payments under investigation in Brazil.”

The Swiss action came after former Petrobras executive Pedro Barusco told a Brazil court he used several bank accounts in Switzerland to launder part of about $100 million in bribes.

Rousseff, the first woman to lead Brazil, was elected in a run-off in 2010. In October last year, as the Petrobras scandal was breaking, she narrowly won re-election. Opponents now accuse her of lying about Petrobras during her re-election campaign.

Earlier this month, Brazil's supreme court said the attorney general's office can investigate 54 people, mostly politicians, in connection with the Petrobras probe.

In February, Petrobras CEO Maria das Graças Foster resigned with five other executives. She had run the oil company since 2012.

The resignations came after the arrest of Nestor Cerveró, the former head of international operations at Petrobras. Prosecutors said he he took bribes from 2003 to 2008 to help contractors win engineering and construction contracts.

Cerveró allegedly used accounts in Switzerland and Uruguay to hide the bribe money. He denied all of the allegations.

Former Petrobras downstream chief Paulo Roberto Costa was arrested last year for being part of a $3.96 billion money-laundering scheme. He said company officials skimmed as much as 3 percent off Petrobras contracts and gave some of the money to politicians.

Ex-CEO Foster hasn't been named in the scandal. She said she didn't know about any of the alleged illegal  activity until police started investigating the company.

The scale of corruption at Petrobras still isn't known. Brazil authorities have claimed kickback and bribery schemes could have diverted from $3.7 billion to $28 billion from the company. The uncertainty has held up Petrobras' release of quarterly and annual audited results.

With about $112 billion in debt, Petrobras is the most indebted oil company in the world, according to Bloomberg.

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Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here