Odebrecht is Latin America's largest construction firm (Odebrecht)

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Odebrecht may pay $2bn to settle Lava Jato corruption investigation

28 September 2016 | By David Rogers | 0 Comments

Brazilian contractor Odebrecht is close to agreeing a settlement with investigators to end a corruption inquiry into the company, and it could reach as high as $2bn, according to reports.

Sources close to negotiations between the company and investigators into the Lava Jato (“Car Wash”) corruption scandal said that Odebrecht may pay 15m reais ($4.6m) to each of up to 60 of its own executives who are testifying against it, as part of a whistleblower reward mechanism.

Those payouts, totalling up to $276m, would be added to $1.8bn (R$6bn) Odebrecht is expected to pay the government in compensation for inflated invoices for construction and engineering contracts, the Valor Economico newspaper reported last week.

If agreed, the $2bn payment would add up to a global settlement for the firm, which is the largest construction and engineering company in Latin America.

Two other contractors, Construtora Andrade Gutierrez and Construtora Camargo Correa, have already reached settlements and agreed to repay a total of $557m (R$1.8bn).

Marcelo Odebrecht, the company’s former chief executive, was sentenced to 19 years in prison in March of this year after being convicted of paying more than $30m in bribes to Petrobras executives.

Testimony in the vast probe begun by prosecuting judge Sergio Moro in March 2014 showed that construction companies formed a cartel in 2003 to overcharge Petrobras for building contracts, and then paid some of the illicit cash to Petrobras executives and politicians from several parties.

The probe has even netted Brazil's former president Luiz Inacio “Lula” da Silva, who, after being charged in March with corruption and money laundering, will now stand trial.

Prosecutors claim the ex-president received cash laundered through the purchase and renovation of a beach apartment, with work carried out by another firm implicated in the cartel, OAS.

In August 2015, five former executives of construction firm OAS were sentenced to between 11 and 16 years in prison for corruption.

Meanwhile, Brazilian police this week arrested a former finance minister of Brazil on suspicion of involvement with the scandal.

Antonio Palocci is under investigation on suspicion that he accepted bribes from Odebrecht in return for awarding it government contracts.

Palocci is also being investigated to determine whether he gave the company favourable treatment in tax legislation, and access to credit lines with the Brazilian Development Bank.

Local media report Judge Sergio Moro as saying there was evidence that Palocci had been paid 128m reais ($40m) over a period of four years, however it was not known what became of that money.

He added that the former minister would be held in custody for five days, after which a decision would be made on his further detention.

The Lava Jato investigation gained its unusual name because of the use of money transfer service at the Posto da Torre petrol station in Brasília to dispose of illicit funds.

Image: Odebrecht is Latin America's largest construction firm (Odebrecht)

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