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Marcelo Odebrecht Agrees to Plea Deal in Brazilian Corruption Probe

Agreement by former head of Odebrecht SA could lead to testimony implicating government officials

Marcelo Odebrecht during a hearing into the Petrobras investigation in September 2015.
Marcelo Odebrecht during a hearing into the Petrobras investigation in September 2015. PHOTO: AGENCE FRANCE-PRESSE/GETTY IMAGES

SÃO PAULO—Marcelo Odebrecht, the jailed former head of Brazilian construction giant Odebrecht SA, on Thursday agreed to sign a plea-bargain agreement in connection with Brazil’s largest corruption probe ever, according to a person close to the negotiations.

The move could roil the nation’s political class yet again. The testimony of the former industrialist, which is part of the deal, has the potential to implicate numerous politicians who allegedly took kickbacks from contractors as part of a years-long graft ring centered on Brazil’s state-run oil company, Petróleo Brasileiro SA,known as Petrobras.

Mr. Odebrecht was one of 77 people, including former and current Odebrecht executives, who started signing plea agreements on Thursday in Brasília, the person close to negotiations said. The lengthy negotiations for the plea deals have kept power brokers in Brazil’s capital on edge for months.

Separately, the privately held Odebrecht firm has agreed to pay about $2 billion in fines for its role in the corruption scandal, the person said. It would be the largest such deal ever negotiated in Brazil.

That deal could be signed as soon as Thursday, according to the person. If accepted by the judge heading the Petrobras investigation, Latin America’s largest construction firm would once again be allowed to bid on government contracts, from which it has been banned since the scandal surfaced in 2014.

In a statement Thursday, the company admitted to unspecified “improper practices” and vowed to fight corruption in all forms in the future. A company spokeswoman declined to confirm the signings of either the individual plea bargains or the company’s new settlement with authorities.

“Odebrecht has learned several lessons from its mistakes,” the statement said. “And it’s evolving.”

Mr. Odebrecht was one of the masterminds of the bribery scheme. Nicknamed “Prince of the Contractors,” he is the former chief executive of Odebrecht and a third-generation scion of a wealthy family.

Sentenced last year to 19 years in prison for corruption, money laundering and conspiracy, Mr. Odebrecht has been held in a lockup in the southern Brazilian city of Curitiba, where the investigation, called “Operation Car Wash,” has been based since his arrest in June 2015. The 48-year-old will likely receive a significant reduction in prison time in exchange for turning state’s evidence.

The widespread investigation already has toppled dozens of business people and lawmakers, upended the country’s political structure, and been a major factor in stalling Brazil’s once-booming economy. The probe helped speed the ouster of President Dilma Rousseff,whose leftist Workers’ Party was tarnished by the scandal.

Prosecutors say illegal payoffs were so institutionalized that the Odebrecht firm maintained a clandestine “department of bribes” along with a detailed accounting of payments to potentially hundreds of political figures.

The plea deals now being signed are “the climax of Car Wash,” said Thiago de Aragão, political scientist at consulting firm Arko Advice in Brasília “It’s the moment that may bring the resolution of the story.”

The plea deals by Mr. Odebrecht and others come at a sensitive time for Ms. Rousseff’s successor, President Michel Temer, who is trying to push controversial austerity measures through Congress to close a massive deficit that’s weighing on Brazil’s economy. High-ranking members of his Brazilian Democratic Movement Party are under investigation in the probe. Concern is growing that Mr. Odebrecht’s testimony could drive the investigation into Mr. Temer’s inner circle or even reach the president himself.

“The deal could unearth revelations that would reduce the chances of this administration surviving through the 2018 elections,” saidJoão Pedro Brugger, from Leme Investimentos asset-management firm. “It creates uncertainty about the economic agenda.”

The Odebrecht company has figured prominently in the corruption scandal, and a number of its executives have been jailed. Prosecutors say Odebrecht and other builders were part of a bid-rigging and bribery ring that operated for at least a decade. The firms skimmed billions of reais from Petrobras through inflated contracts, sharing the ill-gotten gains with politicians who used it to enrich themselves and illegally fund political campaigns, authorities say.

Write to Luciana Magalhaes at Luciana.Magalhaes@wsj.com and Reed Johnson at Reed.Johnson@wsj.com

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