Special report | Corruption and crime

Sliding back

Revelations of graft have fuelled anti-establishmentism

Would you trust them?

IN 1969 A Bahian construction firm called Odebrecht began work on a brutalist building in Rio de Janeiro, which was to be the headquarters of Petrobras. It was an exciting moment: Petrobras had found oil off the coast and Odebrecht would become Brazil’s biggest contractor. But 45 years later came Lava Jato, when scores of businessmen were jailed, including Odebrecht’s boss.

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Brazilian corruption has roots in a promiscuous relationship between the state and private firms. The dictatorship was Odebrecht’s chief customer. Norberto Odebrecht, its founder, saw corruption as a cost of doing business. He wrote in a bible for staff that the client is not “the state” or “the government”, but an individual to satisfy by any means necessary. Odebrecht’s “Department of Structured Operations”, better known as the bribes office, kept a list of code names for over 400 politicians and officials.

Many companies had similar practices. Odebrecht “played the game the best,” says Malu Gaspar, author of a book about the firm. The cost rose with the return of democracy, which brought a plethora of smaller parties, raising spending on political campaigns. Firms put up the cash, in under-the-table campaign donations. Odebrecht’s employees saw these as political contributions. “We knew that what we were doing wasn’t right but the feeling was that it was not that wrong,” says a former executive.

Some scandals were investigated, but most “ended in pizza”, as the Brazilian saying goes. Businessmen rarely received more than a fine. Politicians mostly escaped punishment. As the economy grew, so did graft. Shell companies and Swiss bank accounts mushroomed. The PT even helped Odebrecht win contracts abroad. The existence of this scheme was no surprise, says Sérgio Lazzarini, who wrote a book in 2010 about how firms won contracts by donating to political campaigns. “But no one imagined how bad it was.”

Lava Jato started with a money-laundering investigation of a petrol station in Brasília. New tools such as plea-bargaining and exchange of financial information with foreign authorities uncovered the Petrobras scheme. The scandal contributed to Ms Rousseff’s impeachment. The supreme court banned corporate donations to try to reduce the role of money in politics. Congress made it harder for smaller parties to leech off bigger ones.

Seventy-eight Odebrecht employees signed plea bargains, including the boss, Marcelo Odebrecht, who spent 30 months in jail. Their testimony led to charges against 95 politicians, including Lula, who was convicted of taking bribes. Companies scrambled to reassure shareholders that corruption would no longer be tolerated. “We built a compliance department from scratch,” says João Nogueira, who helped turn around Odebrecht.

Lava Jato prosecutors and Transparency International proposed ten anti-corruption measures to make it easier to prosecute white-collar crime. Many congressmen backed ending foro privilegiado, a legal right that says politicians can be investigated for corruption only by the supreme court. But Lava Jato made mistakes. First, prosecutors and the judge, Sergio Moro, cut corners. Many cases were thrown out for violating due process or for lack of evidence, and leaked messages revealed that Mr Moro was improperly coaching prosecutors. Second, some had partisan goals. Days before the election in 2018, Mr Moro released testimony against Lula. Mr Bolsonaro’s campaign was railing against corruption in the PT. The move seemed aimed at Mr Haddad, who lost in the second round. “Lava Jato is the mother and father of Bolsonaro,” claims Gilmar Mendes, a supreme-court judge.

Mr Bolsonaro chose Mr Moro to be his justice minister. In an Oedipal twist, he then went on to destroy Lava Jato. The obvious reason is that his eldest son, Flávio, a senator, was charged for embezzling the salaries of his employees while a state deputy in Rio. His three other sons are also under investigation, for alleged crimes ranging from running a fake news network to receiving a car from a businessman seeking influence (all deny wrongdoing).

Mr Bolsonaro wants to wreck institutions, not reform them. During the campaign his son Eduardo, now a federal deputy, said that a “soldier and a corporal” would suffice to close the supreme court. In May 2020 Mr Bolsonaro almost ordered the army to do this when he heard that the court might allow police to seize another son’s mobile phone. According to Piauí, an investigative magazine, generals in his cabinet talked him down. After Mr Bolsonaro fired the head of the Federal Police, Mr Moro quit, accusing the president of obstructing justice. This year, the attorney-general chosen by Mr Bolsonaro disbanded the Lava Jato task-force.

“If we were an institutionally mature country, we’d improve the model,” says Mr Lazzarini. “Instead we throw it out.” In April the supreme court annulled Lula’s convictions because Mr Moro was biased. The ruling paves the way for him to run again for president in 2022, and perhaps for other politicians to have their cases annulled. The lower-house whip in Congress has suggested repealing a law against nepotism. New revelations that the development ministry provided 3bn reais for congressmen to buy tractors and other farm equipment at inflated prices undermine Mr Bolsonaro’s claim that there have been no scandals since he took office.

The Petrobras building looks out on other landmarks that once seemed monuments to progress but have become symbols of graft. North is Maracanã stadium, tainted by charges that the ex-governor, Sérgio Cabral, pocketed 60m reais in the run-up to the 2014 World Cup. East is Guanabara Bay, due to be cleaned before the 2016 Olympics but still polluted, partly because of corruption. Even the famous Christ the Redeemer statue was at risk of losing its arms before money was raised for repairs in 2015.

Something else towers over Rio’s poorest residents: criminal mafias known as militias. These heavily armed groups of off-duty cops and other thugs thrive on poverty and state negligence. They are being strengthened by Mr Bolsonaro.

Shadow state

Lots of oil money may have sloshed around Rio, but little went to housing, transport or security for the bairros where waves of migrants from poorer states settled. Daniela (not her real name) moved to a favela called Rio das Pedras in 1997. Militias take pride in ridding favelas of drug dens and drug users. “There are things you have to pretend you don’t see,” she says, scrolling through photos of two smiling teenagers in sweatshirts and, a few frames later, the same boys in a pool of blood. Residents have no choice but to accept militias’ rule. “They are the law,” Daniela says.

They are also the internet provider, the cable company, the cooking-gas distributor and the ride-share service. Every business in Rio das Pedras pays “security tax”, which is used to buy cars and guns and build illegal apartments. Deeds are handled by a dodgy neighbourhood association. This would not be possible without the blessing of the local police. “You don’t build an apartment complex overnight,” says Simone Sibilio, former head of the organised-crime unit at the state prosecutors’ office.

In the past, politicians have condoned militias. In 2006 Rio’s mayor called them a “lesser evil” than drug gangs. Flávio Bolsonaro gave a medal to Adriano Magalhães da Nóbrega, a police captain who prosecutors say ran a militia in Rio das Pedras and committed eight murders. Flávio employed his mother and ex-wife; they allegedly helped with his embezzlement. But the murder in 2018 of Marielle Franco, a city councilwoman who had denounced militias, woke people up. Two cops-turned-hitmen with ties to the Rio das Pedras militia were charged. After the investigation, Ms Sibilio and her colleagues launched “Operation Untouchables”, aimed at the militia’s economic activities. Mr Nóbrega fled before he could be arrested; he was killed in a police operation. Of the 62 alleged milicianos charged in the case, 15 are police officers. Many were jailed after a state parliamentary inquiry into militias in 2008 but freed after witnesses recanted or were killed.

If the state wants to tackle militias, says Ms Sibilio, it must do more to root out corrupt cops. Police, prosecutors and financial watchdogs must collaborate. But the pendulum is moving in the opposite direction. The former governor of Rio, Wilson Witzel, weakened internal control within the police before he was impeached for covid-related graft last year. The state prosecutors’ office recently closed several workgroups for complex crimes, including one that was investigating illegal construction by the Rio das Pedras militia.

The media has pounced on links between militias and the Bolsonaro family, of which there are plenty. Mr Bolsonaro lived in the same gated community as one of Ms Franco’s alleged killers; he appeared in a photo with the other. Such ties are hardly surprising considering the Bolsonaros’ electoral base of cops and soldiers in western Rio.

“The president has a paramilitary ideology,” says Bruno Paes Manso, author of a book about militias. Mr Bolsonaro says “An armed public will never be enslaved” and has tried to pass 31 changes making guns easier to own. Some but not all were suspended by the supreme court. The number of registered firearms has surged since 2017 by 66%, to over a million. Many more circulate illegally. Mr Bolsonaro’s rhetoric is often geared to police and thugs. As a guest on a TV show before Brazil passed 400,000 deaths from covid-19, he held a sign that said CPF cancelado (tax number cancelled), a phrase used by police and militias when they kill.

Full contents of this special report
Brazil: The captain and his country
The economy: A dream deferred
* Corruption and crime: Sliding back
The Amazon: Money trees
Politics: In need of reform
Evangelicals: Of Bibles and ballots
The prospects: Time to go

This article appeared in the Special report section of the print edition under the headline "Sliding back"

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From the June 5th 2021 edition

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