The investigation began in 2014, and was called Operation Car Wash. The investigation focused on construction companies, and Operation Car Wash discovered that the construction companies over-billed Petrobras and bribing Brazilian officials and Petrobras executives for the privilege of over-billing and being awarded contracts. They just went to the well too often — Petrobras suffered multi-billion dollar losses and a dive in its share price. Several Brazilian officials, including former President Luis Inacio Lula da Silva, are serving prison terms for their roles in the bribery scam. Marcelo Odebrecht, the former CEO of Odebrecht, one of the construction firms, served 2.5 years of a 10-year sentence and is now at home, all the time, on house arrest.
Because of violations of the Foreign Corrupt Practices Act (FCPA), Petrobras agreed to pay the U.S. $85.3 million in fines, submit three years of compliance reports, and admit criminal violations of the FCPA requirements on maintaining accurate books and records. Petrobras had already agreed to a $930 million civil penalty with the SEC, but the SEC agreed to credit that amount back to the shareholders because the SEC saw the shareholders as victims of the corrupt executives.
What a car wash!
Safety tip for avoiding FCPA violations — check pricing differentials and see what’s going on with that.