Operation Car Wash


Operation Car Wash was a landmark anti-corruption probe in Brazil. Beginning in March 2014 as the investigation of a small car wash in Brasília over money laundering, the proceedings uncovered a massive corruption scheme in the Brazilian federal government, particularly in state-owned enterprises. The probe was conducted through antitrust regulator. Evidence was collected and presented to the court system by a team of federal prosecutors led by Deltan Dallagnol, while the judge in charge of the operation was Sergio Moro. Eventually, other federal prosecutors and judges would go on to oversee related cases under their jurisdictions in various Brazilian states. The operation implicated leading businessmen, federal congressmen, senators, state governors, federal government ministers, and former presidents Collor, Temer and Lula. Companies and individuals accused of involvement have agreed to pay 25 billion reais in fines and restitution of embezzled public funds.
According to investigators, political appointees in state-owned enterprises systematically extorted bribes from private-sector suppliers. Part of these bribes was channeled to political parties, in order to illegally fund political campaigns, as well as for personal gain. The largest amounts of bribes were detected in oil giant Petrobras; company directors negotiated with contractors to receive illegal kickbacks ranging from 1% to 5% of disbursements. Due to its pervasiveness in Petrobras, the scandal is also known as Petrolão. Investigators have also stated that contractors formed a cartel, involving the country's largest engineering conglomerates such as Odebrecht, Grupo OAS, Andrade Gutierrez, and Carioca Engenharia, to share government contracts among themselves and collude with corrupt politicians. Allegedly, the cartel also operated in contracts signed directly with government agencies, in projects such as the construction of football stadiums for the 2014 World Cup, the Angra 3 nuclear power plant, the Belo Monte dam, and the North-South and Fiol railways. Prosecutors also tracked overseas operations, and cooperated with authorities from 61 countries, among which Switzerland, the United States and Peru were the most frequent collaborating parties.
Appeals against rulings by Judge Sergio Moro were processed in the Brazilian justice system, in which the Supreme Federal Court is the court of last resort. Some of the contested issues were the stage at which convicted defendants would begin to serve their sentences, and the extensive use of plea bargains by prosecutors. In a 2016 decision penned by STF judge Teori Zavascki, the Court found that prison terms should be served once a sentence was confirmed by the local appeals court. This was welcomed by prosecutors as an incentive against illegal practices. Teori Zavascki, the judge overseeing the prosecution, died in a plane crash off the coast of Paraty, in January 2017, and the investigation lost a key backer in the Supreme Federal Court. In 2019, the STF reverted its ruling, and decided that prison sentences only take effect in Brazil after all possible appeals to higher courts are exhausted.
In January 2019, Sergio Moro announced that he would resign from his position as a federal judge, to join the incoming administration of right-wing president Jair Bolsonaro as Justice Minister. This move drew criticism, since Moro had sentenced former president Lula, Bolsonaro's leading rival in the presidential race. Moro fell out of favor with Bolsonaro and left his post in April 2020. He was replaced as the judge in the case by Luiz Bonat.
The probe's reputation was further damaged by revelations arising from a leak of personal conversations between investigators by hacker Walter Delgatti Neto. Delgatti hacked the investigative authorities' online communications over Telegram groups. Dubbed Vaza Jato, the leak purports to expose undue pre-trial coordination between Judge Moro and prosecutors in the case to produce evidence, direct hearings and discuss possible sentencing. The hacking leak was published in the press by The Intercept Brasil and journalist Glenn Greenwald, who claimed that Moro passed on "advice, investigative leads, and inside information to the prosecutors" to "prevent Lula's Workers' Party from winning" the 2018 Brazilian general election. Moro and Dallagnol deny any wrongdoing; they maintain that the contents of the leak have not been confirmed and that, furthermore, no proof of illegal conduct was present in the leaks. Nevertheless, the leaks marked a shift in public opinion, having caused the investigation to lose support. The task force was officially disbanded on 1 February 2021.
Over time, the methods of prosecutors came under strong criticism from Supreme Federal Court judges. In March 2019, judge Gilmar Mendes referred, in a Court session, to Operation Car Wash investigators as "gangsters and scum", adding that their "methods dishonor institutions". In September 2023, STF judge Dias Toffoli stated that the arrest of President Lula was a "setup", "one of the gravest errors in the country's judicial history", and declared all evidence obtained from a settlement with Odebrecht null and void, adding that Operation Car Wash acted as a "21st-century pau de arara". Chief prosecutor Augusto Aras believes that Operation Car Wash left a "cursed legacy".

Investigation

The initial accusation came from businessman Hermes Magnus in 2008, who reported an attempt to launder money through his company, Dunel Indústria e Comércio, a manufacturer of electronic components. Ensuing investigations culminated in the identification of four large criminal rings, headed by:, Alberto Youssef,, and Raul Henrique Srour.
Investigation at first focused on the four black-market currency dealers and improper payments to Alberto Youssef by companies who had won contracts at Petrobras' Abreu and Lima refinery. After they discovered that doleiro Alberto Youssef had acquired a Range Rover Evoque for, a former director of Petrobras, the investigation expanded nationwide. Once he was charged, Costa agreed to provide evidence to the investigation. A newly adopted law introduced 'rewarded collaboration' a type of plea bargaining involving sentence reductions for defendants who cooperate in investigations. Costa's deposition showed which political parties controlled Petrobras.
It also led to a wave of arrests. Fernando Soares, also known as "Fernando Baiano", a businessman and lobbyist, was allegedly the connection between major Brazilian construction firms and the government formed by the Workers’ Party and Brazilian Democratic Movement. After Costa and Soares, many others agreed to collaborate with the prosecution; between 2014 and February 2016, the Federal Public Prosecutor's Office filed 37 criminal charges against 179 people, mostly politicians and businessmen. In December 2017, nearly three hundred people had been accused of crimes in the scandal. After Marcelo Odebrecht, grandson of the company founder, was sentenced to 19 years in prison, he and other Odebrecht executives were, due to the sentence reduction incentives of the 'rewarded collaboration' law, willing to act as witnesses and to give information about the broader corruption scheme. Odebrecht had a secret branch used to make illegal payments in several Latin American countries, from Hugo Chávez in Venezuela to Ricardo Martinelli in Panama. Odebrecht was given fines totalling $2.6 billion by authorities of Brazil, Switzerland, and the United States after the company admitted bribing officials in twelve countries with some $788 million.
Costa and Youssef entered into a plea bargain with prosecutors and the scope of the investigation widened to nine major Brazilian construction firms: Camargo Correa,,, Odebrecht,,,,, and,
as well as politicians involved with Petrobras. Brazilian President Dilma Rousseff, who chaired the board of Petrobras from 2003 to 2010, denied knowledge of any wrongdoing. The Brazilian Supreme Court authorized the investigation of 48 current and former legislators, including former President Luiz Inácio Lula da Silva, in March 2016. Eduardo Cunha, president of the Chamber of Deputies from 2015 to 2016, was convicted of taking approximately $40 million in bribes and hiding funds in secret bank accounts and sentenced to 15 years in prison.
On 19 January 2017, a small plane carrying Supreme Court Justice Teori Zavascki crashed into the sea near the tourist city of Paraty in the state of Rio de Janeiro, killing the magistrate and four other people. Zavascki had been handling Operation Car Wash corruption trials.
A Miami Herald report noted in September 2017 that when Operation Car Wash began in 2014, fewer than 10,000 electronic monitoring bracelets were in use to enforce home detention sentences; by September 2017 the number had ballooned to more than 24,000.

Effect on Petrobras

Petrobras delayed reporting its annual financial results for 2014, and in April 2015 released "audited financial statements" showing $2.1 billion in bribes and a total of almost $17 billion in write-downs due to graft and overvalued assets, which the company characterized as a "conservative" estimate. Had the report been delayed by another week, Petrobras bondholders would have had the right to demand early repayment. Petrobras also suspended dividend payments for 2015. Due in part to the impact of the scandal, as well as to its high debt burden and the low price of oil, Petrobras was also forced to cut capital expenditures and announced it would sell $13.7 billion in assets over the following two years.
The conviction of Aldemir Bendine, Petrobras' former CEO, on corruption charges was annulled by the Supreme Federal Court in 2019 due to objections to the trial procedure.

Domestic politics

On 8 March 2016, Marcelo Odebrecht, CEO of Odebrecht and grandson of the company's founder, was sentenced to 19 years in prison after being convicted of paying more than $30 million in bribes to Petrobras executives.
In April 2018, former president Luiz Inácio Lula da Silva – after having been sentenced for passive corruption and money laundering in relation to a luxury apartment in Guarujá received from Grupo OAS – entered prison in Curitiba to serve his 12-year sentence. However, illegal communications between Car Wash prosecutors and its lead judge came to light in mid-2019, in which the parties suggested that their prosecutorial motive was to prevent Lula's re-election. There were calls to release the former president. As a result, he was released on 8 November 2019 after a Supreme Court ruling.
On 3 July 2018, failed Brazilian billionaire Eike Batista was convicted of bribing former Rio de Janeiro governor Sérgio Cabral Filho for state government contracts, having paid Cabral US$16.6 million, and was sentenced to 30 years imprisonment.