European engineering firms at centre of Brazilian cartel investigation

Authorities in Brazil are investigating whether some of Europe's leading engineering firms defrauded the country's taxpayers of hundreds of millions of euro by participating in cartels in the public transport sector.

French company Alstom and German peer Siemens are also accused of paying bribes to Brazilian public officials involved in setting up the cartels in which companies colluded in the winning of contracts for building and maintaining train and metro lines.

Siemens has reportedly told the country's anti-trust regulator that it participated in the scheme and is co-operating with the inquiry in return for immunity. The regulator estimates that the state government in São Paulo alone overpaid by €183 million as a result of cartels rigging auctions for transport contracts.

Recent street protests across Brazil were sparked by the high cost of using chronically overcrowded public transport in São Paulo.

São Paulo governor Geraldo Alckmin said that if the cartel was proven, "the state is the victim".

Federal police and prosecutors have launched parallel investigations into whether public officials received payments from the companies involved. Several members of Mr Alckmin’s Social Democrats (PSDB) are under investigation for taking bribes.

'Political persecution'
The party, which has run São Paulo state since 1995 and has led the opposition nationally since 2003, says it is the victim of a political persecution orchestrated by Brazil's ruling Workers' Party.

Though leaks have so far focused on the PSDB, the anti-trust regulator says its inquiry is national and includes states controlled by the Workers’ Party. The scandal is a major blow for the image of the PSDB, which has attacked the Workers’ Party for corruption during its decade in power.

In an Ernst & Young global fraud survey last year, 84 per cent of Brazilian executives said corruption was widespread in business in the country, compared to 39 per cent globally and 68 per cent across Latin America. In a recent opinion poll 81 per cent of Brazilians said all the country’s political parties were corrupt.

Siemens – which in 2008 paid $1.6 billion (€1.19 billion) to settle a bribery case in the US following a global corruption scandal – paid at least €8 million in bribes to middlemen in Brazil representing officials, according to German court documents seen by the Estado de S Paulo newspaper.

The paper said Swiss court documents show Alstom – which built and runs Dublin’s Luas – paid €15 million in bribes to Brazilian parties to win public-sector contracts.

The money was supposedly destined for “party finances”. Both firms paid fines in those cases and executives were convicted but avoided jail.

Like Siemens, Alstom has faced multiple accusations of bribery when competing for public contracts in the developing world. "This seems to be the pattern of the management's way of conducting projects but at a time of economic crisis in France no one will criticise it. There is just a focus on winning contracts and creating jobs," said Sophia Lakhdar, director of Sherpa International, a French organisation that fights against corruption by western companies in poorer countries.

Siemens referred inquiries to a statement in which the company said it could not comment on an ongoing investigation but it “co-operates integrally with authorities”.

The company claims it has made “huge efforts” to improve internal controls since 2007 when its global corruption scandal resulted in record fines and the dismissal of dozens of senior executives.

In a statement Alstom said it was co-operating with Brazilian authorities.

Other companies under investigation in Brazil include Spain's CAF, Japan's Mitsui and Canada's Bombardier.