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Shipyards Eyed in Brazil Graft Scandal

Tuesday, November 3, 2015

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As the official investigation into the graft scandal involving Brazilian oil and gas giant Petrobras proceeds, three shipyards were revealed to be among those implicated in the scheme.

The bribery, price fixing and money laundering operation, known as “Operation Car Wash” (Lava Jato) because of a location where the money was laundered, is said to cover more than $20 billion in government contracts spanning a variety of industries, the Financial Times reported Thursday (Oct. 29).

iStock.com / nightman1965
© iStock.com / nightman1965

Three shipyards were revealed to be among those implicated in the bribery scheme related to Brazilian oil and gas giant Petrobras.

As reported earlier, the plan made use of political appointees inside Petrobras who accepted bribes from companies in order to receive contracts to build ships, rigs and other elements related to its offshore oil plans.

Shipyard Participation

Among the companies alleged to have participated in the bribery scheme are shareholders in Brazil’s shipbuilding businesses.

Three shipbuilding companies—Keppel FELS Brasil and Sembcorp Marine’s Jurong Shipyard, both based in Singapore, and Kawasaki Heavy Industries of Japan—were identified in testimony in the Brazilian courts, Seatrade Maritime News reported Oct. 23.

The Singapore shipyards are said to be among those who paid bribes to win contracts connected to the construction of 21 deepwater drillships, each valued at $800 million, the industry publication said.

The Japanese shipyard is reported to have been part of a syndicate that partnered with other companies to win contracts from Sete Brasil, a company Petrobras created with a number of Brazilian banks to construct deepwater rigs and lease them back to Petrobras.

The companies are said to be cooperating with authorities in the investigation.

Shipbuilder Investigation Details

The Parliamentary Inquiry Commission investigating the operation is calling for the indictment of 11 people from the three Singapore and Japanese companies, TradeWinds (subscription) reported Friday (Oct. 30).

iStock.com / ValtarCunha
© iStock.com / ValtarCunha

The shipyards are reported to have taken advantage of a $22 billion “spending spree” in which Sete Brasil sought to propel the rise in Petrobras’s oil production into a “shipbuilding renaissance.”

Four of those under the commission’s sites are said to have been the coordinators or middlemen who helped the three yards set up the bribes. They face charges of money laundering, passive corruption and criminal association in connection with the newbuilding contracts for Sete Brasil.

According to TradeWinds, the shipyards took advantage of a $22 billion “spending spree” in which Sete Brasil sought to propel the rise in Petrobras’s oil production into a “shipbuilding renaissance.”

The yards are said to have agreed to pay a 1 percent kickback for winning the newbuild contract. That payout would be split three ways with Joao Vaccari Neto, a representative of the Workers Party (Brazil’s ruling coalition), as well as with the participating officials from Petrobras and Sete Brasil.

Neto has already received a 15-year sentence for bribery for his role.

Company Statements

Keppel Corporation denies the corruption charges and says it will cooperate with investigators if asked.

“Keppel reiterates its zero-tolerance stance against any form of illegal activity, including bribery and corruption, involving its employees or associates, and will take all necessary steps to eradicate such conduct if discovered,” said the shipyard group, according to TradeWinds.

Enseada Industria Naval, owned by Kawasaki Heavy and UTC Engenharia, also denies any participation in bribery.

“The company ensures that all its contracts were made in strict accordance with the law,” the company told the industry news site, which said UTC declined to comment.

UTC declined to comment, and other shipyards and their shareholders did not respond.

Executive and Government Spotlight

Four executives from Sete Brasil face indictment for their roles in the operation, including Former Sete Brasil director Pedro Barusco, who has already been testifying in the investigation; chairman Newton Carneiro, president Joao Carlos Ferraz and operations director Renato Sanchez.

Former Petrobras services director Renato Duque was sentenced on corruption charges in September for his role in the cartel.

The official investigation involved 48 current or former members of congress, including 12 senators, 22 congressmen, the president of the senate and the speaker of the lower house, the Financial Times said.

Although one former president, Fernando Collor de Mello, has been indicted,Brazil’s current president, Dilma Rouseff, was exonerated of all charges in late October, International Business Times reported.

The investigating parliamentary commission found no proof that Rousseff or her predecessor Luiz Inácio Lula da Silva had any involvement.

Additionally, former Petrobras CEOs, Graça Foster and José Sérgio Gabrielli, who had been implicated in the activities, were also cleared of all charges.

According to the commission’s findings, Petrobras was classified as the “victim of a cartel,” as all of the criminal activity could be considered personally motivated.

Despite this good news for Rousseff, her approval ratings have plummeted among her constituents.

Only 10 percent of respondents to a survey on Rousseff’s popularity indicated found her to be doing an excellent or good job, as she is held responsible for failing to rid the government of corruption.

   

Tagged categories: Asia Pacific; Business matters; Criminal acts; EMEA (Europe, Middle East and Africa); Latin America; Laws and litigation; North America; Oil and Gas; Program/Project Management; Shipyards

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