A Way Out of Corruption Charges in Brazil
“Irregular campaign contributions”, also known as “caixa dois” in Brazilian courts, became a magical framing to save political leaders from jail
Confessing a crime is not only a source of confusion among politicians and businessmen. Now it’s also a profit opportunity. The shares of CCR S.A., Brazil’s largest highway toll operator, rose 11 percent in a single trading session at the end of November following the release of a settlement achieved by the company, in which it confessed illegal payments made to politicians and public officers. This confession led to a gain of 700 million dollars in market value, in a single day. Instead of dropping shares, as would be expected due to possible fines and convictions, the criminal confession has brought wealth to the company.
A generous equation explains this achievement. The settlement required the company to pay a fine of only 21 million dollars, equivalent to 7 days of toll billing in the state of São Paulo, while CCR profited 450 million dollars in 2017. The deal showed how unlikely the company would be restricted by law enforcement. Differently from other companies caught up in crimes, the CCR’s settlement has brought safety to preserve profits and projects.
The reason for this safety is that the Public Ministry’s of the state of São Paulo framed these payments as “caixa dois” (irregular campaign contributions). In Brazil, these irregular contributions are donations made off the books to parties and candidates. Sometimes, prosecutors and judges also consider them legal corruption, and some Workers’ Party politicians were already convicted for that. There were even charges for corruption against politicians that received regular campaign donations, as former senator Valdir Raupp (PMDB), because these payments were considered an exchange of favors. However, prosecutors have not framed as legal corruption, only as irregular contributions, a similar case involving a former governor and Odebrecht, a construction company. The framing depends more on the prosecutors’ views than on evidence of money transfers. CCR’s case shows how unequal these framings are.
Without any verification of the destination of illegal payments, or any financial tracking, a statement from the Public Ministry’s Office treated the company’s allegations of irregular contributions as true. “The company made irregular contributions to electoral campaigns,” acknowledged the Public Ministry’s office in a statement.
The deal, similar to a plea bargain, was signed before any government investigation to verify possible exchanges of favors between politicians and businessmen, a common plot in corruption cases.
How could a crime confession help a company so much? The success is mostly explained by the choice of words. While naming illegal payments as irregular contributions, not bribes, the company helped business executives and politicians to transfer investigations to Electoral Court, focused on campaign legal affairs. These electoral lawsuits are slower than criminal actions and barely hurt profits. The CCR’s deal was signed with prosecutors of public patrimony, focused on administrative misconduct, but were also backed by criminal prosecutors. News articles mentioned that executives would be pardoned from criminal punishment as a reward for having confessed wrongdoings.
In Brazil, accusations of irregular contributions are analyzed by the Electoral Court, but sometimes those accusations are also analyzed by Criminal Justice when prosecutors see evidence of corruption and money laundering. But, if prosecutors decide to frame CCR’s payments only as irregular contributions, as they have been considering, it is highly probable that politicians and businessmen will escape judgement for corruption and money laundering felonies, punishable, respectively, with up to 12 and 10 years in prison and a fine equal to three times the value involved. This standard of financial punishment was applied in lawsuits of Operation Car Wash, the mega-investigation that has convicted more than 100 Brazilian politicians and businessmen since 2014. CCR’s deal arises as an exception to those Car Wash lawsuits, because some politicians and party officials were convicted of corruption on similar grounds, but that doesn’t appear to be the fate of CCR’s executives and politicians involved in its scheme.
Treating illegal payments only as “irregular contributions” allows these illegalities to be judged simply as electoral ideological falsehood, a felony in which the worse thing to happen is a ban to run for office again. Differently from corruption convicts, electoral falsehood convicts are frequently ordered to do unpaid work in communities as an alternative to prison. Electoral convicts are also ordered to pay smaller fines than corruption convicts.
CCR’s feat was to get its illegal payments framed as “irregular contributions” in documents of the Public Ministry’s without any government investigation fact-checking it. The prosecutor José Carlos Blat assured, in an interview given to me, that an investigation will still be carried out to evaluate if CCR did indeed tell the truth. It will still be verified if these payments did not serve the personal enrichment of Geraldo Alckmin and José Serra, both former São Paulo governors, and other politicians denounced in the settlement. Blat was one of six prosecutors in the area of public property who signed the agreement opposed by other four prosecutors in the area who disagree with this and other deals that favored companies involved in corruption.
“This is the beginning. If, during our investigation, a penny arises that is of corruption, the settlement breaks immediately or other measures are taken,” told me the prosecutor.
I asked if he had already investigated Alckmin’s brother-in-law, Adhemar Ribeiro, to verify if he used illegal payments made by CCR for any campaign reasons, as the company says. “This is still going to be verified,” Blat said.
“We are not giving habeas corpus to the company. A needle out of place may lead to rescission of that settlement,” he added.
This same brother-in-law had no campaign function and had already been mentioned as an intermediary of Alckmin to receive illegal payments done by Odebrecht, Brazil’s largest construction company. The former governor of São Paulo reduced his chances of conviction for corruption charges before 2018’s presidential election because one of his Odebrecht’s case was transferred to the Electoral Court. As Alckmin’s Odebrecht lawsuit is still unsolved, after one year and nine months, he wasn’t prohibited to run for office so fast as Brazil’s former president Lula.
But Alckmin wasn’t so lucky, because a Public Finance Court blocked almost 10 million dollars from his assets, granting a request made by prosecutor Ricardo Manuel de Castro. This lawsuit is judging accusations that, as a public officer, Alckmin received illegal money for his electoral campaign in 2010 and that may ban his political rights. Castro is part of a group that opposes against generous deals signed by São Paulo’s Public Ministry with companies prosecuted for bribery charges. As one of the prosecutors involved in Alckmin’s lawsuits, Castro made the most relevant advances in investigations involving the former governor and also requested the suspension of Alckmin’s political rights, but the lawsuit is still pending. But in administrative sphere, in Public Finance Courts, where he works, judges can’t send anyone to jail.
The CCR’s deal is the latest example of a sequence of at least six court settlements in which companies confessed illegal payments, but avoided using words as “bribes” and “corruption” in some depositions. Odebrecht, Andrade Gutierrez and Camargo Corrêa also obtained deals and framed as “irregular contributions” most of the illegal payments they made to politicians, altough they confessed some corruption kickbacks. These companies and their executives tried plea bargain deals after being caught commiting crimes, during investigations of “Car Wash” Operation. The settlements revealed unknown facts for investigators, but companies were also caught withholding information from justice. Andrade Gutierrez and Camargo Corrêa are shareholders of CCR, and both had to deal again with prosecutors about criminal facts undisclosed at their first deals.
With secrets kept inside companies, politicians were helped. However, after several of these deals were approved by prosecutors without obstacles, a first ban appeared. The Odebrecht settlement was rejected in the end of October by the Superior Council of the Public Ministry of the state of São Paulo. The deal had been signed by the same group of prosecutors involved in the negotiation with CCR. By 5 votes to 4, prosecutors rescinded the agreement, and banned Odebrecht from being immune to civil action. The Superior Council assessed that it would not be acceptable to sign an agreement in the event of significant financial loss. The company confessed crimes involved in a contract of $ 140 million dollars, but was not obliged to lose the contract or its revenues in the deal.
For companies and politicians caught up in corruption schemes, the best-case scenario is to get criminal allegations reviewed by judges and prosecutors who do not reject framings of irregular contributions. Although the CCR case has so far protected PSDB’s party politicians from further criminal investigations of corruption, PT representatives have not been so lucky in similar deeds.
Former bookkeeper João Vaccari Neto and political strategist João Santana were convicted of money laundering in less than 2 years, although they also argued that they only dealt with electoral contributions. Vaccari is in jail and was also convicted of corruption. He was, in fact, responsible in the party for dealing with electoral donations, unlike Alckmin’s brother-in-law, caught up in the same kind of scheme in CCR’s and Odebrecht’s deals. With unequal standards of criminal prosecution, Brazil’s fight against corruption remains a challenge after “Car Wash” Operation. Unlike CCR’s toll coins, Brazilian courts can’t have two sides.