Former Petrobras CEO Weighs In on Corruption Probe
Gabrielli Says He Feels Like ‘David Fighting Goliath,’ Denies Any Wrongdoing
LUCIANA MAGALHAES and
Feb. 11, 2015 6:27 p.m. ET
Wall Street Journal
SÃO PAULO— José Sergio Gabrielli, the former chief executive of Petróleo Brasileiro SA, presided over one of the brightest periods in the state-owned oil giant’s history.
During his tenure, from 2005 to 2012, Petrobras, as the company is known, made a vast offshore oil find that could eventually vault Brazil into the ranks of the world’s leading oil producers.
The discovery allowed Petrobras to raise billions from capital markets, transforming itself into a darling of global investors and turning Mr. Gabrielli into one of the most sought-after figures in Brazilian business.
Today in retirement, Mr. Gabrielli still is in demand, but mostly by his legal team, federal authorities and reporters wanting to discuss Petrobras’s stunning decline.
That is because it was on Mr. Gabrielli’s watch that a corruption scandal that has engulfed the company was alleged to have taken root.
Brazilian prosecutors say that, starting around 2004 and for about a decade afterward, Petrobras officials colluded with executives from top suppliers to inflate contract prices and pocket the ill-gotten gains.
“I feel like David fighting Goliath,” the 65-year-old Mr. Gabrielli said Tuesday in an interview with The Wall Street Journal.
Mr. Gabrielli hasn’t been accused of any wrongdoing related to the kickback scheme and denies any knowledge of the alleged corruption.
Prosecutors estimate that around $732 million may have been skimmed. But former Petrobras Chief Executive Maria das Graças Silva Foster, who resigned under pressure last week, said projects tied to the alleged scheme may be overvalued by as much as $31 billion.
Petrobras declined to comment, but the company has said repeatedly that it was the victim of the alleged corruption and that it is cooperating with authorities.
Ms. Foster hasn’t been accused of any wrongdoing. The alleged corruption occurred before she took over from Mr. Gabrielli in 2012.
The scandal, which came to light last year, has devastated Petrobras, Brazil’s biggest and most important company. The firm has lost $80 billion, or about 65% of its market value, over the past five months.
The oil giant is in danger of losing its investment-grade credit rating. And its woes have so paralyzed Brazil’s critical oil-and-gas sector that it could help topple the nation into recession.
Mr. Gabrielli on Tuesday denied any knowledge of or involvement in the alleged corruption.
He hasn’t been charged with any wrongdoing in a probe that authorities have dubbed Operation Car Wash.
“It was impossible for me to identify such crimes then,” Mr. Gabrielli said.
“The investigation has been made by dozens of police officers, prosecutors and even specialized lawyers, and they are facing difficulty in identifying the scheme. Imagine me, one single person, how could it be possible to identify this?” he added.
Mr. Gabrielli said the alleged fraud was the work of a few bad apples inside the company, and not an indication of broader problems with corporate governance or internal controls at Petrobras.
He also played down the financial impact of the alleged corruption compared with the size of contracts signed by Petrobras during the time the alleged wrongdoing took place.
“Even if the numbers are huge…how much has Petrobras invested from 2003 to 2014? Probably it invested an average of $30 billion a year,” he said.
In addition, Mr. Gabrielli accused the press of blowing the scandal out of proportion, threatening his future and reputation.
If Petrobras has made any errors, he said, it was that it hasn’t been vigorous enough in its own defense.
“Petrobras has made a communication mistake; it was quiet,” Mr. Gabrielli said.
“It looks like everything is corruption at Petrobras, and it is not,” he said.
While Mr. Gabrielli hasn’t been implicated in Operation Car Wash, he and other Petrobras officials have been accused by Brazil’s spending watchdog of overpaying for a Texas refinery in 2006.
According to the federal tribunal, known as the TCU, Petrobras lost about $792 million on the deal.
Mr. Gabrielli defended the purchase as a good investment for Petrobras at the time, when refineries were selling at a premium.
The TCU on Wednesday reaffirmed an order to freeze Mr. Gabrielli’s personal assets, a move he is fighting.
“Today I am involved in a huge legal tangle,” he said. “I have to keep a relationship with several lawyers, something I didn’t have to do before.”