Operation Car Wash: Brazil’s endemic corruption laid bare
Presidents, politics and big business have become embroiled in a scandal that has cost the country over €33bn so far
A demonstrator in national colours at Copacabana beach in Rio de Janeiro. Photograph: Ricardo Moraes/Reuters
It was after 10.30pm on March 7th when a car carrying billionaire Joesley Batista pulled up at the Jaburu Palace, one of the modernist masterpieces by architect Oscar Niemeyer that adorn Brazil’s capital, Brasília.
It would be another 70 days before the rest of the country realised it, but the interminable political crisis gripping Latin America’s largest nation – already going on for more than three years – was about to take a dramatic turn for the worse.
Though the Jaburu is officially the vice-president’s residence, Joesley Batista – the son of a country butcher who, with his brothers, created the world’s biggest meat producer – was there to meet President Michel Temer, who had inherited the role on the impeachment of the Workers’ Party’s Dilma Rousseff last year.
Considering many of his opponents argued that he had been engineered into the job via a parliamentary coup, it seemed unusually insouciant of Temer to wait nine months before moving the 1.3km down the road from the Jaburu to the presidency’s official residence, the Alvorada Palace.
When he finally did so he remained just 11 days. Temer suffered from insomnia during his short stay in the Alvorada and, during one sleepless night, turned to his wife Marcela and suggested they return to their former home.
“There must be a ghost there,” he told Batista. “How did Dilma handle it alone?” the businessman asked, referring to Temer’s divorced predecessor. Once famously described by a rival as like a butler in a horror film, Temer never meant for his belief in ghosts to become public knowledge.
Batista never identified himself on entering the premises, the security barrier going up once guards spotted his car’s plates. The encounter, which took place in the basement, was never registered in the official presidential agenda.
But Temer’s precautions were all for naught. Unbeknown to him, Batista was secretly recording their conversation.
During it the two men discussed the businessman’s mounting legal woes and his efforts to derail the multiplying criminal investigations into him. To do so he indicated to Temer he was bribing two judges and a federal prosecutor, information the president never subsequently passed on to the legal authorities under his command.
Temer also appeared to encourage Batista to continue buying the silence of his party colleague Eduardo Cunha. The former speaker of the lower house of congress, it was Cunha who had orchestrated the impeachment of Rousseff that delivered the presidency to Temer. Shortly afterwards, he was arrested and later sentenced to 15 years for corruption. From his cell, he has signalled that if former colleagues such as Temer do not get him out, he might tell prosecutors what he knows about their illicit activities.
But Batista’s main goal at the meeting was to identify a new interlocutor between himself and Temer. He told the president their previous go-between, former minister Geddel Vieira Lima, was no longer of use now that he too was under investigation for corruption.
In his place Temer suggested one of his closest advisers, former congressman Rodrigo Rocha Loures. “It’s Rodrigo? Okay, great,” said Batista, who, after some small talk about his new diet, headed off into the Brasília night.
On April 28th, Rocha Loures – scion of a 300-year old political family from the south of Brazil – was filmed by federal police leaving a traditional pizzeria in São Paulo with 500,000 reais (€135,000) in cash in a carry-on suitcase. He had received the money from one of Batista’s executives. The billionaire would tell federal prosecutors the cash was part of a larger bribe agreed with the president in return for illicit advantages for his companies.
For Temer, the Batista revelations were devastating when they came to light in May. Rocha Loures was arrested while Rodrigo Janot, Brazil’s chief federal prosecutor, asked congress to suspend Temer and send him for trial before the supreme court. After the political trauma of removing one president in 2016, the country was now faced with the decision of whether to ditch her replacement.
Operation Car Wash
Car Wash first came to the public’s attention on St Patrick’s Day 2014 with the arrest of 17 people by federal agents investigating doleiros. One of this group of black market money-dealers, who are specialists in laundering illicit funds, was operating out of a petrol station in Brasília – hence the codename for what was initially a money-laundering investigation.
But what at first glance appeared a probe into garden-variety corruption would eventually assume such dimensions that it rocked Brazil’s political system to its foundations, while eventually spreading across Latin America and as far as Africa and Portugal. “It was a case of you pull on one feather and end up catching a hundred chickens,” says anti-corruption campaigner Gil Castello Branco.
Alberto Youssef, one of the doleiros arrested that St Patrick’s Day, proved to be the feather that led police to executives at Petrobras, Brazil’s state controlled oil giant. Faced with evidence gleaned from the doleiros, these executives eventually admitted they were awarding contracts for refineries, tankers and drilling platforms in return for bribes. This put investigators on the tail of the driller’s main contractors, among them some of the most powerful names in Brazil’s corporate universe.
These companies had contracts worth hundreds of billions of reais, not just with Petrobras but vast swathes of Brazil’s public sector, from the federal government right down to humble municipalities. Once police started arresting their executives they realised their illicit schemes extended far beyond Petrobras to include projects for the World Cup in 2014 and last year’s Olympics, the Angra nuclear power station, giant hydro-electric dams in the Amazon and freight railways connecting Brazil’s vast interior with ports.
To the amazement of Brazilians, billionaire businessmen, ex-governors and former ministers – the untouchables of public life – were forced to do the perp walk before being tried, convicted and jailed
The amount of money paid in bribes to win these lucrative and habitually over-invoiced contracts stunned the nation. But no one was surprised to find out who the businessmen said they were paying off – politicians. And while some of the cash was spent on luxury apartments, fine art and diamonds among other baubles of power, the money trail showed most of it went to illicitly bankroll re-election campaigns.
“From the federal government on down to the smallest municipality in Brazil there is the same logic: embezzle public funds in order to guarantee electoral results and so perpetuate yourself in power. It is systemic corruption within the political system,” explains Márlon Reis, a federal judge whose book The Noble Deputy is a tragicomic guide to understanding Brazilian corruption and the mentality of its numerous practitioners.
Over three years the Car Wash investigation has exposed a vast international web of corruption originating in Brazil but facilitated by the usual offshore havens. To the amazement of Brazilians, billionaire businessmen, ex-governors and former ministers – the untouchables of public life – were forced to do the perp walk before being tried, convicted and jailed.
Among the dozens of politicians caught up in the affair are all six people still alive who have worn the presidential sash: either cited, investigated, charged or convicted in the affair. Investigators have so far identified 6.4 billion reais (€1.7 billion) in bribes. In the upper courts, where due to executive and parliamentary privilege, cases involving serving politicians must be tried, a further 450 people are under investigation.
And yet Car Wash is now just one of a number of investigations that have followed in the path it blazed. “Car Wash no longer just a single operation but a franchise of how to do justice in Brazil,” says Joaquim Falcão, a law professor at the Fundação Getulio Vargas university in Rio de Janeiro.
The cost so far to the country of the various corrupt schemes uncovered is put at 123 billion reais (€33 billion) by police.
For some, what has been revealed amounts to subversion of the republic. “There was an incest between the public and private sector which destroyed democracy, whose mission is to civilise capitalism by creating some parity between it and labour,” says economist Antonio Delfim Netto.
The architect under military rule of the Brazilian economic miracle in the late 1960s and early 1970s, and an adviser to every civilian president since, Delfim Netto has seen enough Brazilian crises up close to be optimistic about what Car Wash means for the country’s future.
“This is an inflection point in our history. The country will never be the same again,” says the elder statesman. “Car Wash demands a profound change in ethics and the moral relationship between the state and the private sector. This moment in our history is akin to Theodore Roosevelt ending the great monopolies in the US over a century ago.”
But others are more cautious. They point to elements of luck in helping Car Wash and its sister operations gain the traction they did. It is not as if they are the first anti-corruption cases in Brazil. But rarely have they been handled by the likes of Sérgio Moro, a federal judge in the southern city of Curitiba.
Quietly spoken and scrupulously polite, Moro (45) represents a generational change in the Brazilian judiciary, a sclerotic, pampered, cranky and often corrupt institution. In contrast, he is a Harvard-trained specialist in money-laundering and handles his cases with an efficiency that shames many of his older colleagues.
In doing so he has been helped by a zealous generation of young federal police officers and prosecutors who make up the Car Wash task force operating out of Curitiba. The complex cases they have built against companies under investigation have forced them into owning up to wrongdoing, agreeing to return billions to the public coffers and fingering their co-conspirators in Brasília.
To accomplish this task prosecutors were able to take advantage of a historic irony. In 2013, when millions of Brazilians took to the street to protest against poor public services, congress decided it needed to do something to show it was responding to the anger on display before it could return to business as usual.
One of the measures it rushed through was a Bill strengthening the power of plea-bargaining in criminal cases. By offering reduced sentences in return for evidence against others, the task force in Curitiba was able to use this law to get testimony against the very politicians who so thoughtlessly passed the plea-bargain Bill.
But resistance to the wave of anti-corruption investigations that Car Wash set off is growing, even within the judiciary itself. It is not yet clear if Moro represents a historic shift or an anomaly. “Car Wash does not yet reflect what happens in all of Brazil. What happens in Curitiba is not the standard across Brazil’s justice and federal prosecution systems,” warns anti-corruption campaigner Castello Branco.
To critics, the investigations exemplified by Car Wash are not saving Brazil’s democracy but destroying it in an orgy of judicial tyranny. “I am extremely preoccupied not just by the erosion of guarantees of individual rights but also because other constitutional principles are being permanently violated,” says Reginaldo Oscar de Castro, the former president of Brazil’s powerful bar association.
At the centre of these attacks, which unites critics of the probes on the left and right, is the use by Moro and other judges of pre-trial detentions and plea-bargains to get testimony from those swept up in the operations.
“These plea-bargains are nothing of the sort,” insists Oscar de Castro, who represented Eduardo Cunha. “These confessions are the fruit of the torture of imprisoning people without trial for months or years until they end up realising the only way to get back their freedom is to implicate others without evidence. Only authoritarian regimes like those of Mao and Stalin accepted the denunciation of others as normal. Brazil is living through a moment of terror and fear and I see no way out without paralysing this process and attempting to correct these errors.”
Evidence from Petrobras’s biggest contractor, Odebrecht, alone has been sufficient to implicate politicians in 11 other countries in Latin America and Africa, among them serving and former presidents
Defenders of the judiciary dismiss such claims as sour grapes by defence lawyers no longer able to protect their once untouchable clients, pointing out that the law prohibits convictions based solely on testimony offered up as part of plea-bargain deals.
“The plea-bargain mechanism is working within the law and these sentences are being upheld by higher courts,” says Jayme de Oliveira, president of the Brazilian Association of Magistrates. “We have had cases of defendants absolved. There is no basis to claims of a violation of the constitution or torture.”
For others, the very survival of Car Wash over three years is proof of its legal integrity. “If the operation had abused its powers and stepped outside the legal parameters it would have been destroyed because the forces that want to end it are very powerful,” argues jurist Modesto Carvalhosa, an anti-corruption expert and veteran of stymied efforts to clean up Brasília in the 1990s. “The proof that Car Wash has not abused its authority is its ability to continue despite all the criminal institutional forces that seek to shut it down.”
The operation is now also an international one. Evidence from Petrobras’s biggest contractor, Odebrecht, alone has been sufficient to implicate politicians in 11 other countries in Latin America and Africa, among them serving and former presidents.
In Peru, one former president has been arrested and another is fighting extradition from the US. When the founders of the Mossack Fonseca law firm in Panama were finally arrested it was not because of the revelations contained in the Panama Papers, but because of their involvement in Car Wash. The US justice department described Odebrecht’s illicit activities – just one element of Car Wash – as an “unparalleled bribery and bid rigging scheme”.
The company has agreed to pay fines of at least €3 billion imposed by US, Brazilian and Swiss authorities.
But in Brazil there are growing signs that the country’s deeply entrenched culture of impunity remains a threat to Car Wash’s prosecutorial zeal, with one of the emerging bastions of opposition to it found in Brazil’s 11-member supreme court.
Long considered unfit for purpose by most legal analysts, it is this tribunal that must judge serving federal politicians caught up in the investigations. But there is little sign of it doing so any time soon.
It is two years since chief prosecutor Rodrigo Janot delivered a list of 55 sitting politicians caught up in the Petrobras affair to the supreme court for investigation. Since then little progress has been made on any of the cases. A second, longer list drawn up based on the testimony from executives at Odebrecht delivered earlier this year, which includes ministers, governors, senators and federal deputies, finds itself snarled up in the queue.
This has come as no surprise. “The supreme court sets no deadlines. It sets its own timing which is determined by internal political choices which do not meet any criteria of accountability,” says Conrado Hübner Mendes, law professor at the University of São Paulo.
There is a debate among Brazilian jurists about whether the issue is a lack of institutional capacity or political cowardice that makes the supreme court so slow to judge politicians. But the result is the same – the risk of cases falling foul of the statute of limitations. “This moroseness in the supreme court is the biggest threat to Car Wash,” says crusading judge Márlon Reis.
As well as this lethargy, another threat to the investigations from the court, or at least some of its members, is a move to rein-in the use by Moro and other lower court judges of pre-trial detentions. A supreme court judge granted Rocha Loures house arrest, despite him being unable to provide any explanation as to why he was filmed running off with a large cash bribe. With it, initial hopes that he would co-operate with investigators have receded.
In addition, Gilmar Mendes, the arch-practitioner of the supreme court’s promiscuous relations with its political counterparts across Brasília’s Square of the Three Powers, is sniping away at the legality of plea-bargain deals.
The voluble Mendes has also emerged as the court’s leading voice against having those convicted by lower courts start their sentences immediately after these have been upheld on appeal. That could push eventual jail time into the distant future, as those convicted remain at liberty while the crushingly slow-moving higher courts hear further appeals.
Political class regrouping
And while public confidence in the supreme court’s ability to deliver justice begins to list, Brazil’s political class is regrouping. The last three years have left it battered, especially the two parties that have dominated the presidency since the return of full democracy in 1989 – the Workers’ Party and the Social Democrats (or PSDB, after its Portuguese initials).
The former has been worst hit, as it was in office when the investigations started. Corruption has existed in Brazil since the time of the Portuguese colony. But debate now rages among political partisans about whether the Workers’ Party instituted a kleptocracy, as some like anti-corruption veteran Modesto Carvalhosa insist, or merely adapted itself to traditional practices on coming to power, as Workers’ Party chieftain Jaques Wagner has admitted.
But what many anti-corruption campaigners do agree on is that there was a step-change after Luiz Inácio Lula da Silva, known simply as Lula, ascended to the presidency in 2003. “Corruption always existed but the Workers’ Party did try to better organise it,” says judge Márlon Reis, who also heads the Movement to Combat Electoral Corruption. “It didn’t invent it but it didn’t just join in. It took advantage of what already existed and tried to systematise it in order to better perpetuate itself in power.”
The two leaders the Workers’ Party elevated to the presidency have both been been caught up in the affair. Fallout from the Petrobras scandal was a major contributing factor in Rousseff’s impeachment. In July, her predecessor Lula, the party’s iconic leader and Brazil’s first working class president, was sentenced to nine years after Judge Moro convicted him in the first of several cases against him. As his legal woes worsen Lula has resorted to a scorched-earth campaign, claiming he is the victim of a giant conspiracy, an “almost diabolical pact” between prosecutors, police, Moro and the media.
Some on Brazil’s left are not convinced and have called on the Workers’ Party to carry out a postmortem to better understand and emerge from the disaster that has engulfed it. But instead the party greeted Lula’s conviction by formally launching his candidacy for next year’s presidential election.
“The Workers’ Party missed its opportunity to carry out the necessary self-criticism and return to what it was before,” says José de Souza Martins, a sociologist who was an early adviser to Lula and a frequent writer since on a party in which many of his students went on to play a central role.
Instead, in recent internal elections senator Gleisi Hoffmann was elected party president, despite being formally accused in Car Wash. “The party missed the chance to get rid of the the national and regional leaderships which are responsible for this disaster and so today its image is that of a party that surrendered to the worst of Brazil’s political traditions,” says Martins.
Despite his conviction, and the legal risk this poses to his eligibility, Lula – the great political communicator of his generation and still a folk hero to millions of poor Brazilians – leads in polls
Others on the left fear the party does seem to have learnt lessons from its involvement in the scandals, but bad ones.
“The Workers’ Party did carry out a self-criticism but the wrong one,” says Marxist philosopher Ruy Fausto. “It got involved in corruption but at least it guaranteed autonomy for the federal police and prosecution service like no one before it. So what did the party do at its last congress? Condemn corruption? No. It criticised this republican posture towards institutions and instead said, ‘We were not smart enough. The next time we have to be cuter.’”
If the Workers’ Party leadership risks turning what was once the greatest left-wing movement in the Americas into an ideological husk of its former self, its main opponent seems set on flirting with outright self-immolation. The PSDB made a triumphant return to power when, on assuming the presidency, Temer called it back into national government for the first time in 13 years. But this alliance has turned into an ordeal for the party.
Part of the evidence Joesley Batista delivered to investigators included an expletive-ridden recording in which PSDB leader Aécio Neves, the party’s defeated presidential candidate in 2014, asked him for two million reais (€520,000). Neves – the playboy heir of a political dynasty – apologised while insisting he had done nothing illegal, claiming he just asked for a loan.
Neves said he needed the money because, like many of the PSDB’s other leaders, he has been swept up in the anti-corruption probes they all initially supported when these seemed only to be targeting the Workers’ Party. The Batista revelations split the PSDB, and its continuing alliance with a president whose popularity hovers just above zero per cent has some in the party worried about its future.
“The party runs an enormous risk because the tape recorded by Batista for ordinary citizens makes it is more than obvious that Temer maintained spurious relations with this company. On the substance of the issue Temer is unable to answer. He is seen as corrupt,” says Bolívar Lamounier, a founding member of the PSDB and perhaps its most independent-minded intellectual. “So for the PSDB to remain in the administration gives the impression they are doing so to hold on to positions. Which is a colossal error.”
When the lower house of congress voted in August to reject the chief prosecutor’s effort to send Temer for trial before the supreme court, half the PSDB’s caucus sided with the president. Temer beat off Janot’s efforts by 263 votes to 227 after an orgy of vote-buying and pork barrel spending that made a mockery of his commitment to restore order to the public accounts.
Among those who voted in his favour was deputy Celso Jacob, allowed to attend congressional sessions by day before returning at night to the prison where he is serving a sentence for corruption in a case involving a municipal creche.
Since Temer’s reprieve the political counter-attack has gathered pace. Pouncing on the inevitable errors made in the sprawling probes, politicians are pushing a new law through the legislature designed to intimidate prosecutors and judges. The budget for Car Wash has been slashed. Under the disguise of reform, politicians have sought to alter the voting system to favour incumbents in next year’s general election.
There is resistance to these efforts to stymie the corruption investigations but it is a testament to the resilience of Brazil’s political class that, after three years, it can attempt them at all. In 2004 Judge Moro penned an essay examining Italy’s historic Clean Hands anti-corruption case and sought to apply its lessons to his own handling of Car Wash.
But within two years of Clean Hands the two parties that dominated post-war Italian democracy – the Christian Democrats and the Socialists – had been swept away by the ensuing scandal. In Brazil, after 3½ years of Car Wash, the political class hangs on, some of its big beasts gone, the rest lashed but still seeking to ride out the storm, leaving the economy to slide towards a fiscal cliff as politicians focus on reaching next year’s election and the chance of a new mandate – and with it four more years of safety from the clutches of the lower courts.
Crucially, it is being aided in this ambition by the failure of any credible new forces to emerge on the left or right of the political spectrum. The rise of a fascistic former military officer, Jair Bolsonaro, has sparked fears of a hankering for a return to authoritarian rule. But his demagoguery repels the majority. Instead it is likely that, despite both being caught up in the probes, next year’s presidential election will once again come down to a contest between the Workers’ Party and the PSDB, as did the last six races.
Despite his conviction, and the legal risk this poses to his eligibility, Lula – the great political communicator of his generation and still a folk hero to millions of poor Brazilians – leads in polls. He is barnstorming across the country with an increasingly populist message, all the while winking at the corrupt conservative forces who served with him in office before and whose help he will need again to return to the presidential palace.
This campaign might provoke another constitutional crisis. If his July conviction is upheld, Lula will fall foul of Brazil’s “clean record law”. This bars those convicted of corruption from office. The Workers’ Party has hinted it will not recognise the vote if its only competitive candidate cannot take part.
The right has yet to settle on a candidate but, unlike the left, it has options, and none with the legal problems of Lula. With Neves now out of contention, the formal PSDB candidate is São Paulo governor Geraldo Alckmin. A charisma vacuum, he excites few in the party. Many remember the mauling he received at the hands of Lula in the 2006 race and worry about the fact his brother-in-law has been named in Car Wash as the financial operator of his political machine’s own illicit schemes.
The new star on the right is a former presenter of the Brazilian Apprentice TV show, businessman João Doria. Last year he was elected mayor of São Paulo for the PSDB, winning his first ever campaign by playing the outsider. Doria poses as an anti-politician even though much of his considerable fortune comes from a networking company selling eager business people access to politicians attending its events.
Still a novelty, wealthy, media-savvy, fervently anti-leftist and fluent in the language of Brazil’s money-power nexus, he increasingly looks the ideal candidate in which the country’s traditional elite can take refuge in turbulent times.
If Alckmin refuses to step aside, Doria will have no shortage of other suitors. Already he is being courted by the plethora of parties that dominate congress, a morass of groupings, nearly all tainted by corruption, eager to end the investigations, conservative by instinct but less interested in ideology than proximity to power and the positions and pork this brings.
As if to highlight Doria’s growing appeal to this old establishment, he has recently been the recipient of lavish praise from Temer, whose Democratic Movement of Brazil Party (PMDB) is the epitome of this congress.
Hanging on to office
The president now hangs on to office, if not much power. Meanwhile, Batista’s efforts to avoid punishment for his own wrongdoing, by serving up the president to prosecutors, are in tatters. Evidence has emerged that he was not completely frank about his criminality, as the law demands of anyone seeking a plea-bargain deal.
Last month he and his twin brother, Wesley, became the latest Brazilian billionaires to be taken into custody. From behind bars they are now attempting to save their business empire, Irish division Moy Park the latest asset to go.
Temer’s allies claim Batista’s fall proves he was the victim of a conspiracy. The implication that Janot was played by a self-confessed criminal, and worse, with the help of a member of his own team, means his term drew to a close last month under a cloud, further darkening the prospects for Car Wash’s success.
But even a weakened Janot in his last days in office still managed to bring the first formal charges against Rousseff. He accused her of forming a criminal organisation while in power. Named as her co-conspirator is Lula.
On the same day Rousseff was charged, police raided an apartment linked to Geddel Vieira Lima, the former minister who was Temer and Batista’s original go-between. Police found suitcases and boxes filled with 42.6 million reais and US$2.7 million, the equivalent of almost €14 million, in cash. Geddel is also now in custody. In the last act of his four-year term Janot accused him along with Temer, Eduardo Cunha and other PMDB leaders of involvement in a criminal organisation that sucked in 587 million reais (€157 million) in bribes. Another vote on the president’s future now looms in congress.
And so, after more than three years, there is no sense that the political melodrama will reach its fifth act any time soon. The initial public euphoria that Car Wash would transform Brazil has dissipated into a sullen realisation that alone it cannot build a new, more ethical, republic. Brasília is a city on tenterhooks, its politicians scrambling to survive but alert to the possibility that developments in the probes could set off more political earthquakes.
“We are living a decisive moment,” observes Gil Castello Branco. “We are at a moment when we could see great advances in morality and ethics but also enormous setbacks. We either continue walking towards becoming a more honest country or else we can go back to this culture of impunity and corruption.”
It is a moment Brazil must face with its institutions and political parties discredited, and the most unpredictable election since the return of democracy in the 1980s just a year away. The ultimate fate of the anti-corruption operations remains unknown. For all the blows it has received, despite the felling of some of its biggest leaders, the political system could yet survive the investigations.
Meanwhile, the economy crawls out of its longest-ever recession, the public finances still in tatters, poverty increasing, inequality widening, violence rising in a ravaged society unable to mount a sustained effort to force change on the politicians responsible.
“Today Brazil is governed at random and will continue to be until there is a rupture coming, from where we do not know yet,” says a gloomy José de Souza Martins. “It is perhaps because of this we continue to insist that God is Brazilian.”