Former Petrobras Executive Paying Back Millions in Graft Funds

Former Petrobras Executive Paying Back Millions in Graft Funds

Pedro Barusco already has handed over 182 million Brazilian reais to federal prosecutors

By

PAUL KIERNAN

March 11, 2015 7:36 p.m. ET

Wall Street Journal

RIO DE JANEIRO—A former executive of Petróleo Brasileiro SA has begun to pay back the nearly $100 million he said he amassed through bribery while at the Brazilian state oil company.

Petrobras’ former executive manager of engineering, Pedro Barusco, already has handed over 182 million Brazilian reais—about $58 million based on current exchange rates—to federal prosecutors as part of a cooperation agreement, the attorney general’s office said Wednesday.

Federal Judge Sérgio Moro said some 140 million reais of that has been deposited into a judicial bank account in the southern city of Curitiba. He said the money, along with millions more that has yet to be repatriated from offshore accounts, will be returned to Petrobras.

The total amount to be repatriated is about four times greater than any previous record for foreign-asset recovery in Brazil.

More than a dozen suspects have struck plea deals with prosecutors, admitting their crimes, agreeing to repay stolen cash and offering new evidence to move the investigation forward. But Mr. Barusco, who hasn’t been arrested or charged, may be the first to have actually begun to pay up. Some others being investigated or charged have denied wrongdoing.

Judge Moro said he revealed the repayment information as a result of doubts that have arisen about Mr. Barusco’s agreement with prosecutors. Mr. Barusco faced a barrage of questions from legislators on Tuesday, when the 30-year Petrobras veteran testified as part of a congressional investigation into the alleged corruption scheme.

In the hearing, Mr. Barusco said he first began taking bribes “in 1997, 1998,” but that the practice became more widespread and institutionalized by 2003 or 2004. By the time he left the company in 2011, Mr. Barusco said had received some $70 million in bribes, a fortune that swelled to nearly $100 million in the Swiss accounts where he invested most of it.

While that is the highest figure attributed to any individual suspect in the investigation so far, Mr. Barusco estimated that the ruling Workers’ Party received perhaps double that amount. The party vehemently denies having received any illegal donations and has said it is suing Mr. Barusco for “making accusations without presenting proof.”

Federal prosecutors say some of Brazil’s largest construction firms formed a cartel to drive up prices of major Petrobras contracts and kicked back some of the windfall to Brazilian politicians, top political parties and corrupt executives at the oil firm. Last week, the Supreme Court authorized the attorney general to investigate around 50 current and former politicians, including the heads of both chambers of Congress. The two heads of the chambers have denied wrongdoing and have expressed a willingness to cooperate with the investigation.

The money Mr. Barusco already has deposited represents most of the $67.5 million that he had agreed to return to public coffers via the federal court in Curitiba. It had been stashed in about a dozen accounts at Swiss banks including J. Safra Sarasin, Banque Cramer & Cie, PKB Privatbank and Lombar Odier, according to federal prosecutors.

Mr. Barusco also has committed to return $29.5 million via a federal court in Rio de Janeiro, which is handling a separate investigation, and to pay a fine of 3.25 million reais, Judge Moro added.

Petrobras didn’t respond to a request for comment about the pending reimbursement, which Mr. Moro said may have “conditions” attached to its use. The company previously has said it was a victim of the alleged corruption scheme.

The attorney general’s office said the Justice Ministry’s previous record for foreign-asset recovery was less than 45 million reais, about four times less than the amount of funds Mr. Barusco is expected to ultimately repatriate.

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