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Friday, April 21, 2017

Odebrecht seeks deal to keep Sarmiento project alive

The corporate logo of the Odebrecht SA construction conglomerate is pictured at its headquarters in Sao Paulo, Brazil, April 17, 2017.

Under-fire Brazilian construction giant looking to hang onto multi-billion dollar contract but Argentine law may not allow it

Seeking to draw a line underneath bribery accusations that run into the millions of dollars, Odebrecht has approached the Argentine Attorney General’s office and prosecutors investigating the case in an effort to come to an agreement with the condition that it would keep the multi-billion dollar Sarmiento tunneling project. The Brazilian construction giant, the Herald has learned, has indicated that it is willing to pay fines and penalties as part of any agreement. However, Argentine law makes that kind of arrangement difficult.

Although Brazil continues to be rocked by the political fallout of the Odebrecht corruption scandals and neighbours such as Peru and Colombia have been absorbed by the revelations, Argentina has remained relatively immune so far.

Odebrecht however, in a plea bargain approved by a US judge this week, has admitted to paying US$ 35 million in bribes in Argentina in public works kickbacks and a June 1st deal to come to an understanding with the Argentine courts before confidential details become public in Brazil. That information will be made available in Brazil, but for the Argentine courts to obtain it as evidence it must be formally requested by an Argentine judge.

The agreement between Odebrecht and US, Brazilian and Swiss authorities includes a recognition that between 2007 and 2014 it paid upwards of US$35 million in bribes in Argentina with the knowledge that the money would in part end up in the hands of public officials. The payments were linked to at least three public works projects worth US$278 million. Among the public works projects singled out is the Sarmiento trainline that connects Once (in BA City) to Moreno (Greater BA province) — a multi-billion dollar project that was hailed with announcements on multiple occasions during the Kirchnerite era and which was finally set into motion in 2016, after the Macri administration guaranteed the financing for the works. The project, which has a budget of US$3 billion is being executed by a consortium that goes by the name of Consorcio Nuevo Sarmiento (CNS) will carry out the works.First opened for bidding during the Néstor Kirchner years, the project was finally awarded in the Cristina Fernández de Kirchner administration to the CNS consortium. The contract with CNS was signed during the CFK administration and has gone through various modifications in light of the trouble at Odebrecht pertaining to the Petrobras scandal and question marks over the source of financing for the mammoth project.

Delays, at least partially attributable to hiccups in the financing that had been committed by the Brazilian Development Bank (BNDES) ensured that ground wasn’t broken. That hurdle was overcome by the Macri administration’s decision to finance the project itself.

CNS is comprised of Iecsa, the construction company formerly owned by Macri’s cousin Ángelo Calcaterra, Brazil’s Odebrecht, Spain’s Comsa and the Italian engineering company Ghella. Calcaterra sold IECSA to the Pampa Energía group in March of this year.

Negotiations between the Brazilian construction giant and prosecutors have been ongoing but the Argentine legal framework has made it more difficult for the company to cut a deal than in Brazil. That framework requires the state to reclaim any funds paid to the company obtained through illicit agreement.

Brazilian newspaper O Estado de São Paulo reported in March that Brazilian Federal Police had obtained copies of internal Odebrecht emails that suggested that a meeting was set up with an Iesca executive to discuss some “DGI” items (the DGI acronym has been cited by the police as stand-in for the use of bribes to win contracts.) The emails, discovered as part of a back-up held by Odebrecht director Mauricio Couri Ribeiro, indicate that a meeting to be held with a “Sánchez Caballero,” with DGI noted on the agenda. Javier Sánchez Caballero is the current CEO of Iesca. A further email details that a meeting to discuss the “Sarmiento money” set aside within the DGI category, an amount totalling US$20 million.

The emails, which date back to 2010, establish a link between Iecsa and Kirchnerite officials such as former Transport secretary Ricardo Jaime and his adviser Manuel Vázquez, who are both currently in custody on other corruption charges.

In a series of messages turned over to the Federal Police, correspondence between Vázquez and Couri over what appears to be the non-payment of a bribe is forwarded onto Fernando Migliaccio, one of the men responsible at Odebrecht for the payment of kickbacks using international bank accounts.

Migliaccio was arrested in Switzerland on corruption charges and has cooperated with Brazilian investigators. The sought-after bribe payment, apparently in the range of US$80,000, was eventually made through a series of offshore accounts in Uruguay and Curacao.

After striking a deal with US and Brazilian prosecutors in December in which it paid fines and admitted to paying hundreds of millions of dollars of bribes in 12 countries, Odebrecht has been trying to sign additional pacts across Latin America. Details of the bribes paid by Odebrecht have remained confidential as part of a deal signed with Brazilian authorities but from June 1st those details will become available to prosecutors in Argentina.

In March, Attorney-General Alejandra Gils Carbó attended a meeting of the 11 Latin American attorney generals carrying out investigations into Odebrecht bribery schemes along with Rodríguez. The meeting produced the Brasilia Declaration, in which the heads of each country promises the greatest possible cooperation in the Odebrecht and Lava Jato cases. Joint investigative teams, the reclaiming of assets or funds obtained by bribery and the full autonomy of investigative teams is central to the declaration.

The approach by Odebrecht took place after the Brasilia meeting.

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