Illegalities, abuses and contradictions: 5 years of Operation ‘Lava Jato’
Judging by the names given to its phases, operation Lava-Jato (‘Carwash’) could be mistaken for a play in 57 acts. Its latest phase speaks to criticism against the abuses and arbitrariness committed throughout the past five years: “Without Limits (57th).” Other names refer to the Italian origin of the strategy it applies: “Buona Fortuna” (49th phase). Finally, some refer to torture and execution tactics, such as “Asphyxia” (40th phase), “Slaughter” (44th phase), and “Final Judgment” (7th phase).
Lava-Jato began on March 17, 2014, when the Federal Police (PF) conducted its first arrest warrants on 17 people, including black market money dealer Alberto Youssef, accused of commanding a bribery scheme in contracts signed between contracting companies and state-owned company Petrobras.
The investigations are under the responsibility of the Federal Courts of Paraná State, where the first suspicions came up. Therefore, the operation was under the responsibility of the judge of the 13th Federal Court of Curitiba, Mr. Sergio Moro. The Federal Prosecution Office (MPF) then created a special task-force to oversee the instigations. Since those under investigation included politicians with jurisdictional prerogative, some investigations were sent to the Federal Attorney General’s Office in Brasília (DF), and the trial of these cases was under the jurisdiction of the Federal Supreme Court (STF).
At the STF, the first Justice assigned to Lava-Jato cases was Justice Teori Zavaski, who died in a plane crash in January 2017 and was replaced by Justice Edson Fachin in the following month.
According to figures from the MPF of Paraná, up to October 2018, there were 1,072 search and seizure orders, 227 bench warrants, 120 arrest warrants, 138 temporary arrest warrants, and 6 detentions in flagrante delicto. The same evaluation assesses there were 176 plea bargain agreements, 11 leniency agreements (a sort of plea bargain for companies), and a total of 215 convictions of 140 people.
Loss
The Federal Prosecution Office and the PF estimate that the corruption scheme in Petrobras caused a loss of BRL 42 billion to the country in misapplication of funds, overbilling of construction works, and bidding fraud, as well as BRL 6.2 billion in illicit payments. The figures recorded until last year indicate that the company should be reimbursed a total of R$ 12 billion, of which about 20% have already been returned.
A report by the Institute for Strategic Studies on Oil, Gas, and Biofuels (INEEP) indicates that the economic loss caused in the entire oil production chain was three times higher than the impact generated by corruption. In the first year alone, Lava-Jato took away nearly R$ 42 billion from the Brazilian economy, promoting “the dismantling of important sectors of the national economy, mainly the oil industry and its supply chain, such as civil construction, metalwork, shipbuilding and heavy engineering, in addition to the nuclear program”- according to INEEP.
In the same year, Petrobras announced a BRL 80.4-billion profit and a BRL 6.2-billion loss caused by corruption.
Economists are unanimous in recognizing that Lava-Jato has boosted unemployment in the country. According to the INEEP report, the shipbuilding sector alone lost over 50 thousand jobs between 2014 and 2018: from 82,472 workers to 29,539 in less than five years.
The fall is worsened by the Petrobras divestiture policy introduced during the Michel Temer (MDB) administration under the guise of “balancing the books” of the company. The current plan intends to promote a 25% decrease in investments, the privatization of refineries and distributors, as well as the implementation of a price policy in line with the international market, which will raise the price paid by end consumers.
Prior Events
In 2004, ten years before Lava-Jato, Sérgio Moro published an academic article in which he praised the methods and results of the Mani Pulite (in Italian) (“Clean Hands”) operation, which was launched in Italy in the 1990s. Among the tactics applied there was a symbiotic relationship between the judiciary and media outlets aimed at publishing selective leaks, seeking to morally weaken the accused before they were indicted.
The operation investigated six former premiers and over 500 congressmen. Critics of Mani Pulite say that the operation paved the way for a period of discrediting of politics, which “opportunists” took advantage of. In addition, there was a process of sophistication in corruption practices within Italian state-owned companies, and the foundations of systemic corruption were preserved.
Lava-Jato was also inspired by the United States. According to political scientist William Nozaki, in 2010, Moro was part of the Brazilian delegation that participated in the so-called Bridges Project, at the initiative of the US government, in order to “exchange experiences on fighting corruption and money laundering.” The meeting took place two years after the theft of two containers with computers and hard drives containing confidential pre-salt related Petrobras information was revealed.
Months before Lava-Jato began, a former systems analyst and former CIA intelligence official revealed a US government spying scheme against the then-President Dilma Rousseff. “If, on the one hand, we cannot establish any immediate causal relation between one thing and the other, since there is no evidence, on the other hand, there is a temporal coincidence that is very symptomatic and, therefore, must be observed carefully, because it will reveal points of coordination that became more explicit in the agreement signed between the MPF, US monetary authorities, and Petrobras,” says Mr. Nozaki.
The Rule of Law put in jeopardy
In articles published by the Brasil de Fato newspaper over these five years, jurists criticized the violations of rights practiced by Lava-Jato, which put the Rule of Law State in jeopardy.
Cláudia Maria Barbosa, a former post-doctoral researcher at York University in Canada and now Constitutional Law professor at the Catholic University of Paraná (PUC / PR), explained that Lava-Jato’s modus operandi threatens, in particular, article 5 of the Constitution, but also violates international agreements. The right to be tried by an impartial judge, for example, is provided for in Article 10 of the Universal Declaration of Human Rights and in Article 8 of the Pact of San José de Costa Rica.
Another problem pointed out by the professor is the fact that in the Lava-Jato operation plea bargain agreements are not spontaneous, as the law provides, but result from the threat of psychological torture. “Plea bargains exist, but Lava-Jato’s use of them makes said procedure illegal (because it violates the law) and unconstitutional (because it violates, for instance, human dignity and it is an act of torture).”
The Good Life of plea-bargainees
Plea bargains are a mere negotiation between the Government and the defendant. The Government offers an agreement and benefits, such as sentence reduction or exemption. In return, the defendant admits that he committed crimes and provides clues that help demonstrate the involvement of third parties in one or more crimes.
In Lava-Jato, bargainees have received greater benefits than those provided for by law, which causes an imbalance in the negotiations and may encourage false cooperation, experts say.
In May 2016, the former director of Transpetro, Sérgio Machado, confessed to the MPF that he embezzled funds from the company during the 11 years he was its CEO. In addition to enriching his family with illicit funds, he gave nearly BRL 100 million in kickbacks to Temer and 20 other politicians, among them senators Renan Calheiros, Edson Lobão, Romero Jucá, Jader Barbalho, and former president José Sarney, all members of the MDB party.
After paying a fine of BRL 75 million to the Brazilian Courts, Machado was released even from using an ankle monitor, and now lives in an oceanfront mansion in the city of Fortaleza (CE).
Former Mato Grosso do Sul senator, Delcídio do Amaral (former member of PSDB and PT parties), after being arrested due to an order issued by the Supreme Court and being impeached, decided to collaborate with Justice. Mr. Amaral is ineligible until 2027, but registered in 2018 his candidacy for the Senate as a member of the Christian Labor Party (PTC) – weeks later, it was denied by the Electoral Federal Prosecution Office (MPE). Still, Amaral’s name and photo appeared in the electronic ballot box, and he received nearly 110,000 votes, equivalent to 7.76% of the Mato Grosso state’s voting population. Today, Delcídio do Amaral lives in São Paulo with his family and takes care of the estate inherited from his parents in Mato Grosso.
Although accused of embezzling more than BRL 350 million from Petrobras, Paulo Roberto Costa, a former Petrobras supply director, currently lives in a luxury apartment in Rio de Janeiro (RJ). After signing his plea bargain agreement, his provisional detention became house arrest with an ankle monitor; in addition, he was sentenced to a maximum of two years to be served in semi-open prison conditions, regardless of the sentence.
Black market money dealer Alberto Youssef, who confessed to having laundered millions of reais in kickbacks from Petrobras contracts, was sentenced to three to five years of imprisonment in closed conditions, but had his incarceration commuted to open conditions, regardless of the sentence. The MPF accepted the exclusion of four properties and a tract of land from the list of property seized for payment of a fine, authorized his daughters to use assets that are openly the result of his crimes, and the release of a piece of property for his ex-wife and another one for his daughters. Youssef currently lives in a luxury apartment in Sao Paulo.
Pedro Barusco, a former Petrobras manager, admitted in his plea bargain to have embezzled funds from the company through oil contracts since 1996. After returning the amount of USD 100 million, that is, nearly BRL 252 million to the MPF, Barusco was granted a maximum of a two-year period to serve his sentence, regardless of the sentencing established by the courts. The MPF has also guaranteed it will work to avoid applying sanctions to him or to his companies in future cases. Like Paulo Roberto Costa, Barusco lives today in a luxury apartment in Rio de Janeiro (RJ).
In August 2018, the Second Panel of the STF decided to no longer accept cases from the Federal Prosecution Office based solely on plea bargains. According to the Justices, if there is not minimal evidence of guilt against defendants, the case should not even be opened.
The Billion-reais Foundation
Last week, the announcement of the creation of a private foundation with resources from Petrobras to allegedly promote “anti-corruption” projects ended up exposing contradictions of prosecutors who are members of the Lava-Jato task force.
The foundation was the result of an agreement between the MPF in Paraná, Petrobras, and the US Department of Justice. According to the document, the state-owned company, burdened by corruption cases, would have to pay over BRL 3 billion to the Federal Prosecution Office and to US authorities. To manage the money, the MPF proposed the creation of a foundation governed by private law, to be controlled by the prosecutors.
In William Nozaki’s opinion, prosecutors deviated from their role when they accepted the terms of the agreement. “A fundamental problem that arises from this is the deviation of the role of the Public Prosecution Office and of prosecutors in the way the agreement was built.”
According to Nozaki, the agreement reveals the reversal of values that govern the performance of Lava-Jato’s prosecutors, who seek to burden even more a company that has been previously harmed by corruption practices. “A private foundation managed by a regional and localized corporation, managing funds from a company that has been harmed by the corruption process, through the construction of a kind of a quasi-government institution, funded with public money. This process is wrong from beginning to end.”
After criticism from the legal community and the repercussion in the press, the prosecutors announced they would drop the foundation, but did not clarify what will be the future of the agreement with the US. On Monday (11), Deputy Attorney General Lucas Rocha Furtado, of the Federal Prosecution Office asked the Federal Accounting Court (TCU) to take measures to verify the constitutionality of the agreement.
Moro versus Lula
On August 14, 2016, the Lava-Jato task force prosecutor Deltan Dallagnol called up a press conference to file a formal complaint against former president Luiz Inácio Lula da Silva. In addition to presenting a PowerPoint presentation in which Lula was accused of being the “head of a criminal organization that operated at Petrobras,” Dallagnol hinted that although there was no evidence, there was “conviction’ that Lula was guilty – without being given to him the chance to defend himself.
The press conference given by prosecutor Dallagnol took place five months after the first Lava-Jato case against Lula, which occurred on March 4, when a bench warrant was issued against the former president, who was forced to go to the Federal Police to testify, even though he had not been subpoenaed by the courts. The accusation filed by Mr. Dallagnol was accepted by Mr. Moro on September 20, 2016.
Lula’s first testimony in operation Lava-Jato was taken on May 10, 2017, when the former president reported that he was being the victim of “political, legal, and media persecution.”
On July 12, 2017, Moro sentenced the former president to nine and a half years of imprisonment, finding him guilty of the charges of money laundering and solicitation of bribe related to the renovation of a 3-level apartment in Guarujá (SP), allegedly paid by OAS Construction Company in exchange for public contracts. Lula’s defense filed an appeal, on the grounds of denial of an opportunity to be heard and inexistence of a crime supporting the conviction. At that time, the first voting intention polls for the 2018 presidential elections pointed Lula as the frontrunner to become president, winning in the first round.
After reviewing the case in record time, and in response to the appeal filed by the former president’s defense, on January 24, three appellate judges of the Federal Regional Court of the 4th Region (TRF4) of Porto Alegre (RS) unanimously upheld Lula’s conviction and increased his sentence to 12 years and a month of imprisonment in closed prison conditions
On April 5, 2018, after the STF denied a preventive habeas corpus petition, Moro ordered the arrest of the former president, which took place two days later. Since then, Lula has been serving his sentence at the Federal Police Headquarters, in Curitiba.
On July 9, TRF4 appellate judge Rogério Favretto acknowledged the arrest of the former president was unlawful and ordered his immediate release. The decision was ignored by the sentence execution authorities and, after Moro’s intervention, the TRF4 chief appellate judge, Mr. Thompson Flores, revoked the decision of his colleague and kept Lula imprisoned.
Also in August 2017, the UN Human Rights Committee issued an injunction requesting the Brazilian government to offer the conditions for the former president to run in the elections. The determination was not carried out.
Therefore, Lula’s candidacy was rejected by the Electoral Courts on August 31, and former Education Minister, Fernando Haddad (PT) became the candidate in his place. On October 28, the far-right candidate Jair Bolsonaro (PSL) was elected President of Brazil. Shortly after the elections, he appointed the then trial-court judge, Sergio Moro, as Minister of Justice. It is important to note that Mr. Moro was the same judge that convicted the favorite candidate in the elections, thus paving the way for the victory of his main opponent.
Brasil de Fato | Editing: Daniel Giovanaz | Translated by Márcia Macêdo and Paulo Penteado.
