The Brazilian contractor Odebrecht – implicated in hundreds of millions of dollars’ worth of bribes throughout South America – filed for bankruptcy protection on Monday, seeking to restructure some $20 billion in debt.
The restructuring, if successful, would be the largest in Brazil’s history and follows a turbulent decade for the company that saw it attached to cases bringing down two Brazilian presidents and three Peruvian presidents, and implicating an Ecuadorian president, Venezuela’s socialist dictator, Venezuela’s socialist opposition, and dozens of public officials throughout the continent.
Odebrecht is considered the main private actor in the ongoing Brazilian corruption scandal known as “Operation Car Wash,” named after a small business Brazilian prosecutors found was laundering millions for dozens of politicians. In that scandal, prosecutors claimed that politicians would grant Odebrecht overpriced contracts on government infrastructure projects and the company would then kick some of the extra cash back to the politicians to guarantee future deals. Prosecutors in other South American countries found similar behaviors, indicting multiple regional heads of state.
In a stunning climax to the dramatic ongoing Odebrecht corruption scandal, former Peruvian President Alan García committed suicide minutes after police knocked on his door in April, seeking to question him on potentially taking bribes from the company.
Odebrecht filed its petition for bankruptcy protection in a Sao Paulo court Monday, a process that will allow it more time to settle with its various creditors and find money to stay in business, according to the Agence France-Presse (AFP). AFP claims that the corporation, already significantly damaged by nearly a decade of corruption probes, found itself cornered financially after failing to sell its share in a corporate entity affiliated with Petrobras, the Brazilian state oil firm.
The petition specifically requests that the court “bar the group’s seven largest creditors – six banks and an investment fund – from taking possession or selling shares in the group’s crown jewel, its controlling stake in petrochemical company Braskem SA,” the Petrobras affiliate, according to Reuters. The corporation assessed its overall debt to be worth over $25 billion.
“Given the expiration of several debts, the occurrence of unforeseeable events and two recent attacks on business assets, the administration of ODB (Odebrecht), with the authorization of its controlling shareholder, concluded that the filing for judicial recovery is the most adequate measure to conclude the process of financial restructuring,” the contractor said in a statement, according to Brazil’s Folha de Sao Paulo.
Odebrecht has shrunk significantly since the beginning of the Brazilian “Car Wash” investigations, O Globo noted on Monday. The company has reduced the size of its staff by nearly 80 percent since 2015, losing over 20,000 employees, and gross revenue fell about 20 percent. A document revealed this week, the Brazilian newspaper reported, that the company blamed that downsizing in part to “the reputational impact of errors committed.”
Despite the massive and public nature of the company’s fall, economic pundits told O Globo Odebrecht had a chance of surviving the restructuring so long as it can arrive at mutually beneficial agreements with its creditors before time runs out on its legal petition.
“The size of the credits in judicial recovery and the complexity of the company (which operates in different sectors) are factors that make the success of the project difficult,” the newspaper noted. Selling assets and putting money on the table for creditors could give the contractor time to recover.
Given the recent history of the company, it remains unclear if its survival is possible without reverting to industrial scale corruption on a continental scale. Odebrecht has been in business for 75 years and, as AFP noted, had a hand in “building everything from the Miami Heat basketball arena to a hydroelectric dam in Angola.”
It also built many failed projects and did not build even more work it billed Latin American governments for, according to Brazilian and other South American prosecutors. Odebrecht has admitted to much of its illegal activity, paying a $3.5 billion fine in 2016 after Brazilian, American, and Swiss prosecutors charged the corporation with corruption. American prosecutors estimate at least $788 million in graft spread out of Odebrecht throughout at least 12 countries.
Its former CEO, Marcelo Odebrecht, was sentenced to 19 years in prison in 2015 for his role in bribing dozens of politicians around the world. Odebrecht told a Brazilian court that the corporation spent up to two percent of its annual revenue on bribes. He is currently serving the term under house arrest in his Sao Paulo mansion.
In Brazil, the highest-profile culprit convicted of working with Odebrecht is former socialist president Luiz Inácio Lula da Silva, currently serving an over decade-long term in prison for buying a luxury beachfront property with bribes from Odebrecht and other firms. “Operation Car Wash” also found former President Michel Temer implicated in accepting bribes, as well as Eduardo Cunha, the former Speaker of the House who led the impeachment of former President Dilma Rousseff. While she served as Lula’s minister of energy, prosecutors have not accused Rousseff of corruption in connection to Operation Car Wash. Lawmakers and other politicians of all political stripes have also fallen to the “Car Wash” probe.
In Peru, prosecutors are seeking a 20-year prison sentence for former leftist President Ollanta Humala and wife Nadine Heredia for allegedly taking over $3 million in bribes from Odebrecht. His successor, Pedro Pablo Kuczynski, resigned in March 2018 amid a probe accusing him of taking another $3 million in “consulting fees” from Odebrecht. As mentioned above, former President Alan Garciá stood accused of taking bribes from the corporation as well, but shot himself in his home when police visited to question him in April. Peruvian police also imprisoned Keiko Fujimori, conservative former presidential candidate and daughter of former President Alberto Fujimori, for allegedly taking millions in campaign contributions from Odebrecht.
Venezuelan dictator Nicolás Maduro took $35 million in campaign contributions from Odebrecht, according to a former executive at the company, while Marcelo Odebrecht claimed to have given millions to several members of the Venezuelan opposition in the event that they toppled Maduro, most prominently among them former presidential candidate Henrique Capriles Radonski.
Leaders in Panama, Ecuador, the Dominican Republic, and Colombia have also been accused of taking bribes from the company.