Oil and Gas

US turns up heat with criminal investigation into Petrobras

Kara Scannell in New York and Joe Leahy in São Paulo
Taxi drivers fill the tanks of their vehicles with natural gas at a Petroleo Brasileiro SA (Petrobas) fueling station in Rio de Janeiro, Brazil.
Dado Galdieri | Bloomberg | Getty Images

US authorities are investigating whether Petrobras or its employees were paid bribes, adding to the mounting domestic corruption probes facing the Brazilian state-controlled oil company, people familiar with the matter say.

The US Department of Justice has opened a criminal investigation into the company, whose American depository receipts trade in New York, while the Securities and Exchange Commission is pursuing a civil investigation, these people say.

Brazil's biggest company has become the target of investigations by the federal police and prosecutors that is emerging as one of the country's biggest corruption cases in history.Many of the alleged problems occurred when President Dilma Rousseff was head of the company before taking office in 2011.

US authorities are looking into whether Petrobras or its employees, middlemen or contractors, violated the Foreign Corrupt Practices Act, an anti-corruption statute that makes it illegal to bribe foreign officials to win or retain business, these people say.

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Spokesmen for the DoJ and SEC declined to comment. Petrobras did not respond to requests for comment.

Prosecutors in Brazilallege that Petrobras and its contractors over inflated the cost of capital expenditure projects and acquisitions by hundreds of millions of dollars and paid part of the proceeds to politicians from the ruling Workers' Party (PT) coalition.

The two principal figures involved in the alleged scam, Paulo Roberto Costa, a former Petrobras director, and Alberto Youssef, a convicted black market money dealer, have entered into plea bargains in which they allege that ruling coalition politicians received 3 per cent of all contracts.

The PT and its coalition partners have vehemently denied the claims.

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The emergence of the US investigations into the allegations, however, could raise the international profile of the scandal and have implications for Petrobras' financial statements.

The company is majority owned by the Brazilian government, an arrangement that US prosecutors have in unrelated cases argued would make them government employees.

The FCPA does not apply to government officials who receive alleged bribes but in recent years the DoJ has more aggressively pursued employees using anti-money laundering statues,conspiracy charges, or the Travel Act.

Specific transactions under the scanner of Brazilian investigators include the purchase of a refinery by Petrobras in the US and the construction of refineries in Brazil.

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Lawyers said in cases such as that of Petrobras, US investigators may concentrate more on the quality of the company's bookkeeping and internal controls.

The FCPA includes criminal and civil liability if it can be shown that a person willfully falsified a company's accounts or records, or evaded its internal controls.

In a recent statement Petrobras said that it had hired Brazilian and US private investigators to probe the claims of Mr Costa.

It has also set up internal investigative committees, requested access to police and court records, and sought clarifications from companies cited in the official investigations.

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"Petrobras has taken many steps designed to carefully examine the facts," the company said.

The DoJ and SEC have ramped up their prosecution of the FCPA bringing more than two dozen cases last year against companies.

The DoJ brought criminal charges against a number of individuals linked to Direct Access Partners, a New York broker-dealer, for allegedly paying bribes to a representative of Bandes, the Venezuelan state-owned bank, for directing business to the broker-dealer.The bank employee who received the bribes was also charged and pleaded guilty.