Petrobras: a tail of dirty politics, heavy corruption and an absent Board of Directors

by Tina Evaristo

by seloart
by seloart

The disclosure last year of what was apparently just a bad business done by Petrobras – the Brazilian semi-public oil company – evolved and became one of the biggest corruption scandal to hit the country after the reinstatement of democracy in 1988. The Brazilian Supreme Court has authorized the investigation of more than 40 politicians, including the speakers of the Chamber and the Senate and a former President. They are all suspects of integrating a large kickback scheme. Parliament is also promising to carry out their own investigation too, politically unbiased and dispassionate according to them. The hearings have already started.

The subject requires a lot of explaining indeed. Apart from Petrobras’ own executives, the corruption ring also included big companies from Brazil, Europe and Asia. The scheme, based on the payment of bribes in exchange for contracts, is supposed to have managed over $ 2,5 billion. Where was the Board of Directors? And the Fiscal Board? What about the Risk Management Committee? There is also the Advisory Committee. Everyone failed to spot the wrongdoings that took place over, at least, one decade.

Only with the acquisition of Pasadena, a Texas oil refinery, Petrobras lost about $ 1.2 billion back in 2006. The deal was closed under the blessing of the then Board of Directors’ chairwoman, Ms Dilma Rousseff, who became Brazil’s president in 2010. She admits having done a bad business but claims misguidance by a report prepared by the then director of Petrobras International Division, Mr Nestor Cervero.

What is left to explanation is how a deal of such magnitude is not subject to a profound scrutiny? The Board of Director is comprised by 10 men and women supposed to have thorough knowledge of the business they represent. Apparently, none of them, including the chairwoman, cared to dig accurate information, make the appropriate questions and check the facts before signing the contract. The deal was unanimously approved by the Board, although it meant that Petrobras would incur in spending more than $1 billion for a facility that had previously cost a little over $ 42 million.

Ms Rousseff came public and said that had she known at the time of the risks that came along with the deal, she would never have authorized it. But what separated her and the other nine board members from knowing the truth? In his defense, Cervero states that the complete information was always available to whoever felt the need to get a full picture of the deal. And threatens to “tell the truth” (leading to the conclusion that what is presently known is nothing but a basket full of lies) in case he is summoned to present further information on the subject.

If we are to accept the present version that one single guy can fool the entire board of a company that was among the top 10 oil giants in the world, we have to question the qualification of the board members and more specifically the way they are selected for such important position. Are they really fit for a job that requires making decisions involving a 10 digit figure? Or are they given a seat on the board based on political affinities rather than knowledge of the business they are helping to run? Congress is promising to investigate the circumstances surrounding the deal and all the kickback payments. Hopefully, they will address the selection process of board members and introduce appropriate penalties. After all, a board member is paid to see, understand and act. That is their job.

Tina Evaristo is a journalist in the fields of politics and economics. In the last 15 years she has provided media coverage of major Congress hearings for newspapers and magazines.