A Train to Bangladania

Brazil had plans to connect its two largest cities with a high-speed train, a billion dollar project to be inaugurated in time for the 2014 World Cup. A solution was offered by an Italian businessman facing fraud charges and a Brazilian politician. Together, the two men role-played their way into a farce riddled with unsolved mysteries.

By Leandro Demori | Edited by Fronteira
Illustration by Marcelo Armesto
Collaboration Francesco Giurato

A man points at the railroad, as if gesturing towards a road to the future. The Milan-Turin rail line was still under construction when Moreno Gori, a partially bald Italian man with straight lips and a rectangular chin guaranteed that his company Italplan had over 25 years of experience in the transportation industry. In fact, high speed train was the company’s flagship project. The railroad in front of him would be just another entry in the company’s extensive portfolio.

Gori talks to a man standing next to him. The Italian keeps pointing at the railroad, telling the man that a construction of this caliber would be possible in Brazil: a high-speed railway line between Rio de Janeiro and São Paulo. The man by his side is always the shortest man or woman around, whether in photographs, among politicians and authorities, or among one of Brazil’s many political backslappers. He is José Francisco das Neves, a.k.a. Juquinha. The president of Valec, a Brazilian state-company formed under the Ministry of Transportation whose mission was to “coordinate, monitor, supervise, and administer” the construction of railroads in Brazil. These include the high-speed train project between Rio de Janeiro and São Paulo, the so-called jewel of the Growth and Acceleration Program (PAC, a series of rapid development measures from Luiz Inácio Lula da Silva’s first term).

Gori and Juquinha had dined in Milan the previous night, October 26th, 2004. Now, they stand looking admiringly at the railroad ties of the Milan-Turin railway, to be inaugurated by Prime Minister Silvio Berlusconi within five years’ time. In Brazil, decades of unfulfilled dreams and projects would finally come to an end thanks to the efforts of two men and Italplan’s 25 years of experience. The country would finally have its “bullet” train.

The hungarian embarassment

High-speed rail has been the cherished dream of multiple Brazilian governments. The roads between Rio de Janeiro and São Paulo, covering a distance up to 450 kilometers, are both dangerous and congested, and some are still unpaved. A 40 minute flight between the cities is an expensive option. For a brief moment, however, the dream became true. At 5 o’clock in the afternoon of March 11th, 1974, leaflets handed to the passengers departing from São Paulo assured that the Hungarian-made Ganz-Mávag train would arrive at Rio’s Central Station within four and a half hours. High speed on rails, according to the standards of the time.

The Brazilian government had purchased the Hungarian trains using resources from the coffee trade, a staple currency since the days of the Brazilian Empire. The Rio-São Paulo line ran six trains imported from Hungary. From the moment the wagons docked at the Rio de Janeiro port in 1973 to the inaugural trips in the following year, taking advantage of an old railroad inaugurated by Emperor Pedro II of Brazil, the technology was praised by the press. Ads promised a train experience in which “minutes of relaxation” would replace tense moments at the wheel. Unfortunately, while the Ganz-Mávag trains were safe and comfortable, they began displaying mechanical deficiencies within a few trips: The drive system was too weak for steep ascents, especially between the cities of Japeri and Barra do Piraí, where the unforgiving hills of the region would exhaust a train originally designed to run over Hungarian plains. As the wheels would slacken, the engines would overheat, forcing the trains to stop mid-trip. And while the trains were assembled in Hungary, they also had a combination of German engines, Swiss controls and Italian breaks. In a non-globalized world, maintenance quickly became a multinational headache. Regrettably, the high-speed railway between Rio and São Paulo stopped running just four years after its inauguration. By 1978, the trains had moved to other, less busy lines. They would turn into scrap metal a few years later.

The government went looking for a substitute. In 1978, Transportation Minister Dyrceu Nogueira announced a trip to Japan to check the world’s first bullet train. Japan’s high-speed railway had been inaugurated in 1964, the same year the military came to power in Brazil. Nogueira was the commander of the First Railway Battalion and had a keen interest in high-speed rail. The visit, which sealed a pact made by President Ernesto Geisel when visiting the country two years before, was harshly attacked in a speech by deputy Pacheco Chaves (from the Brazilian Democratic Movement party, MDB), who complained about the size of the project amid a shortage of public funds. “President Geisel must not allow this. It would only result in new and serious difficulties for the future government, whose heritage is already alarming!” he yelled from the pulpit at the Brazilian House of Representatives (the lower chamber of the Brazilian National Congress) on August 23 of that year.

Chaves’ cries went unheard, and the bullet train gained momentum. The local press wrote about the project multiple times, framing high-speed rail as Brazil’s entry into modernity. Full-page newspaper reports showcased the cargo capacity of the railways cars, the speed of the motors and the train’s comfortable, sophisticated cabins. At the bottom of the pages, travel agencies sold tourism packages in ads to meet the demand of Brazilians wanting to travel to Japan and “ride the eastern train.”

Nogueira’s efforts were in vain. In the years that followed, Japanese, Spanish, and French investors continued to show interest in high-speed rail by offering engineering technology and credit, but Brazil’s financial conditions looked ominous for foreign investors at the time.

In addition, there were more pressing matters for Brazil in the late 20th century than building a high speed rail line between its two largest cities. The premature death of President Tancredo Neves, uncontrolled inflation, unpayable foreign debt, financial drought, and the impeachment of President Fernando Collor all took precedence over the project. “Bangladania, half Bangladesh and half Albania, is an unpromised land where a few politicians are trying to drag 130 million Brazilians away.” wrote Mário Simonsen, banker and former minister of military governments, in the article A Train to Bangladania, published in newspaper O Globo in June of 1987. Simonsen criticized politicians and their fire to resolve contingencies of Capitalism with the stroke of a pen, a move that could cast Brazil into the shadows of Bangladania. The title was a direct reference to yet another Brazilian attempt at building the railway, a project which was abandoned in that same year.

A few years later in 1990, one of the most solid opportunities to get the project back on track appeared on the waters of Rio de Janeiro aboard Le Pharaon, a 60-meter yacht that could hold 12 passengers and 11 crew members. At the helm was Ghaith Pharaon, a Saudi billionaire with a western education and wealth from the Saudi kingdom, who was both the shareholder of an investment bank and a business partner of the Bush family in an energy company.

Ghaith was welcomed in Brazil by Arthur Falk, a businessman from Rio and one of the most prominent and media-friendly millionaires of the 1990s. Falk ran the Papatudo lottery, a betting enterprise generating millions of dollars a year. Advertised by a team of Brazilian TV celebrities, the Papatudo lottery awarded money prizes to lottery winners, or returned part of the cost of the ticket at the end of each year. The sweepstakes became popular throughout Brazil, distributing wealth to the lucky ones and a few ambulances to charity hospitals. Falk and Ghaith’s public image made them the perfect pair to get the megalomaniac high-speed train on rails.

While on board of Le Pharaon, Falk and Ghaith had parties and meetings in Angra dos Reis, a coastal town 150 km away from Rio de Janeiro. The duo planned to convince local investors to back the train, exchanging Brazilian foreign debt securities for investments in the railway. The plan seemed popular with the public because it promised not to require state money. In exchange, though, Trem de Alta Velocidade S.A. (High Velocity Train) — a company for which Ghaith was a partner — would have concession over the railway for 90 years, being able to freely decide the cost of fare.

Arthur Falk was still dreaming about the bullet train when Papatudo came tumbling down in the mid-90s.

Papatudo left millions of debt, and a complex bankruptcy estate that still wanders the courts like a ghost. Falk’s Saudi friend Ghaith Pharaon would also face rough seas: named as a partner of the Bin Laden family in “banks, holdings, foundations and charity projects,” during the September 11 investigations, he was sought by the FBI for almost two decades. He was also accused by the French parliament of being a financier of terrorism. Tracked down by American authorities, Pharaon was nearly arrested by the FBI and the Italian police in 2006, after his boat was seen anchored to an island near Sicily. The Saudi managed to escape arrest by sailing a marine course to Algeria. While no longer on the American most wanted list, Ghaith continues to spend most of his time aboard Le Pharaon in neutral territory.

The italian project

The Rio-São Paulo bullet train seemed destined to remain a pipe dream until 2003, when José Francisco das Neves, aka Juquinha, was appointed as the president of Valec, a company formed in 1972 by Vale do Rio Doce (then a state-company) in partnership with the American USS Engineers and Consultants. Valec was tasked with putting in place a railroad for the Carajás iron ore mine, recently discovered by the Americans. In the 80s, the Brazilian government gained complete control of Valec.

In the months following his appointment, Juquinha immersed himself in the bullet train project with support from the upper echelons of the new government. Within a year, he’d contacted several companies interested in investing in the project’s construction. Recently elected president Luiz Inácio Lula da Silva viewed the enterprise the same way presidents before him did: as an undeniable sign of wealth, technology and future. An international business card.

On June 24, 2004, a decree signed by the Transport Minister, Alfredo Nascimento, created a Working Group led by Valec. The purpose of the group was to assess and choose a viability study to outline parameters for the upcoming bidding process that would appoint a contractor for the construction. The winning study would serve as an instruction manual to indicate, for example, how many passengers should be transported per year, the cost of a ticket, the adjustments that the existing railroads would have to undergo in order to accommodate high-speed trains, the location of train stops, the location of tunnels, and the project’s total budget — from the screws on the ties to the railway cars.

Moreno Gori’s Italplan had a head start. The company had already been collecting information about the billion-dollar enterprise as early as 2004, before the creation of the Working Group. “We learned about the bullet train project through local contracts” writes Roberta Peccini, the current president of Italplan, Engineering, Environment & Transports S.p.A. At the end of the call for submissions, the Working Group received three studies.

TRANSCORR RSC
The Transcorr study was carried out under the coordination of GEIPOT, a since liquidated company attached to the Ministry of Labor, using resources from the German development bank KFW. Transcorr’s study was rather old, having been carried out between 1997 and 1999.

SIEMENS / ODEBRECHT / INTERGLOBAL
Carried out by a consortium made up of the German company Siemens and the Brazilian companies Odebrecht and Interglobal, using German expertise, the study was presented to the Working Group in October of 2004.

ITALPLAN
Developed by Italplan Engineering Environment & Transports SRL, using Italian knowledge. The study was presented to the Working Group in September of 2004.

The Working Group had six months to review all the viability studies. In the meantime, sitting in seat 2C of Varig flight RG-8734, Valec’s Juquinha headed for Milan on October 25, 2004, at 23:45, to meet with Moreno Gori and check the construction of the Milan-Turim railway. Juquinha was scheduled to travel to Germany on October 28 to inspect an electromagnetic train, but he postponed the trip by three days and remained in Italy. His agenda in these three days remains a mystery, and it has not been registered in the official documents by Valec.

The deadline of the Working Group was extended twice, until April of 2005, six months after Juquinha’s Milan tour, when Transport Minister Alfredo Nascimento was handed its report. Signed by members of the Department of Transport Management Programs, the Department of National Transportation Policy, the National Agency for Land Transport, the Ministry of Planning, Budget and Management, The Brazilian Development Bank (BNDES), and Valec, the report concluded that Transcorr’s eight-year-old study was “of the highest credibility and will serve as a reference for the analyses of project alternatives being evaluated by the Working Group.” The report eliminated Transcorr’s study, but its content would be used to inform the decision-making about the eventual winner.

The Siemens/Odebrecht/Interglobal consortium estimated the least expensive construction budget and the shortest construction period: 6.3 billion dollars and six years of construction, compared to Transcorr’s estimates of 7.2 billion dollars in cost and a seven year construction period. But the German-Brazilian consortium was eventually eliminated from contention, since it required 80% of the project’s total investment — amounting to around 5 billion dollars — to be paid by the government. Brazil wanted private money to finance the entire project.

While Italplan’s study estimated seven years for construction and a budget of 9 billion dollars — much higher than its competitors — it made an irresistible claim: not a single penny would have to be spent by the government. Under a grant system where 100% of the money would be private, Italplan’s estimated ticket price of 39 dollars was much lower than Siemens/Odebrecht/Interglobal (77 dollars) or Transcorr’s (81 dollars).

The company also provided estimates on taxes generated from the railway, something competitors failed to do. The numbers were monstrously high: 73.7 billion dollars over the 35 years that the concession would manage the line — over 2 billion dollars a year.

Describing Italplan as “an engineering company with great experience in the high-speed transportation sector, whose staff contributed to the development of the Italian bullet train”, the report was decisive: “the Working Group recommends that the Transport Minister use the necessary institutional measures to ensure implementation of a high-speed railway connecting the cities of Rio de Janeiro and São Paulo for passenger transportation, using as a reference the technical and financial models demonstrated in the Italplan Project, for the purpose of public bidding at auction.”

Italplan, an underdog among the huge competitors fighting for the project, had won. The Italians now waited for the call for tender based on their viability study, including the selection of a contractor to implement construction of the railway.

There was still work to be done. In a way, the study approved by the Ministry of Transportation was a rough guide for the full viability study. Before the government could launch a bidding process and choose a contractor, Italplan had to present a broader, more comprehensive research. Ary Raghiant Neto, lawyer and former judge for the Electoral Court of Mato Grosso do Sul state in Brazil told me: “They brought technicians and engineers to Brazil. They spent two years coming and going and investing. I even put together an office for them in Brasilia.” Raghiant Neto has known Moreno Gori since at least 2002, when he represented an Italian and a Swiss national at Alfred Klotz do Brasil, a company for which Gori was a partner. In 2003, the company was authorized by the National Electric Energy Agency to build two thermoelectric plants in the state of Mato Grosso do Sul.

Roberta Peccini confirms that Italplan employees traveled to Brazil on a monthly basis to build upon the initial viability study commissioned by Valec. The company’s remaining employees, 74 people, worked from Italy. To calculate the environmental impact, Peccini says that Italplan hired “a specialized Brazilian company,” without citing its name. To estimate how many passengers would use the train, Peccini says they hired “50 local consultants, coordinated by our personnel in Brazil, who conducted over 15 thousand household interviews with people between Rio de Janeiro and São Paulo.” Following those interviews, the company concluded that annual train demand in 2011 would be 32 million passengers. This demand estimate was more than quadruple the estimate of the Siemens/Odebrecht/Interglobal consortium, which calculated fewer than 7 million passengers per year.

While their technicians worked to transform the viability study into a project approved by agencies such as the National Historic and Artistic Heritage Institute of Brazil (IPHAN) and the Brazilian Institute of Environment and Renewable Natural Resources (IBAMA), Italplan also began moving into the political arena. Roberta Peccini participated in meetings and presentations, but Moreno Gori was the real face of the company in Brazil.

“I was surprised when one of our partners returned from a trip to Brazil with Gori, and told me how easily he was moving around in Brazil’s political environment.” A source added. Going by Technical-Director of Italplan, Moreno Gori was received at the office of Luiz Fernando Furlan, then Minister of Development, Industry and International Trade. The meeting took place on October 3, 2006. Besides Gori and a few government bureaucrats, Valec’s Juquinha and Alberto Bernini were also present, the latter being Gori’s Italian partner at Alfred Klotz do Brasil and, in the meeting with Furlan, the Vice-President of Italplan. The meeting lasted about an hour. Michele Valensise, former Italian Ambassador to Brazil, who was present during the meeting, told me that “Italplan’s representatives presented the study that they had conducted for the high-speed train in Brazil. I met Moreno Gori that day.”

Juquinha also did his part. The president of Valec used every opportunity to speak about the bullet train. In a 2007 interview to Brazilian news outlet Agência Brasil, Juquinha declared that companies from Italy, Japan, South Korea, France and Brazil were interested in building the railway. The government, Juquinha said proudly, would not need to spend a penny. “There is no risk whatsoever,” he affirmed. The bullet train was coming.

A ripe orange

After a series of meetings with Valec and Italplan, the Brazilian Federal Court of Auditors (TCU) checked the numbers in a financial spreadsheet sent by email called “Analisi Finanziaria.xls,” put together by Italplan. The spreadsheet was considered as the definitive calculation of the train’s operative costs by both Italplan and Valec. Auditors studied the tables for months and found several problems, such as “errors in the calculation of energy costs,” “incorrect usage of tax rates,” and “exclusion of social contribution on net income (CSLL) at the calculating base of income tax.” The incongruities caused the Federal Court of Auditors to send a due diligence team to Valec in search of answers.

The state-company promised to revise and resubmit their report to the Court. Auditors reopened the file and went through the papers for a second time. Dozens of flaws were found, but the study was “approved with restrictions” in April of 2007.

The warnings became a footnote in the press, where the bullet train gained momentum thanks to its “approved” status. However, a legislative consultant from the Brazilian House of Representatives was working in silence. His name was Eduardo Fernandez Silva, a master in economics with a good knowledge on engineering projects such as Italplan’s. In December of 2007, Fernandez put the finishing touches on a study that opens with a verse from a 1966 samba song by Brazilian singer and songwriter Ataulfo Alves, Laranja Madura (Ripe Orange).

The Fernandez report examined the viability studies of all three competitors, but paid special attention to Italplan’s work. Fernandez carved up the study’s numbers like a skilled butcher. After 25 pages, Fernandez presented his conclusions: “The viability of a High-Velocity Train linking Rio de Janeiro to São Paulo depends on the presence of highly unlikely hypotheses, and the statements supporting opposing conclusion are tenuous.”

Italplan’s passenger demand estimates, calculated at 32.6 million per year, were among the main problems of the study: “In 2006, the total number of travelers between Rio de Janeiro and São Paulo — bus, car and plane included — was 8.4 million.” calculated Fernandez. “For Italplan’s estimates to occur, all passengers that have flown between Rio and São Paulo in 2006 would have to take the train, plus every bus passenger who travels from Rio or São Paulo to any other Brazilian city or neighboring country.” Fernandez added. Since passenger estimates affect fares, Fernandez also noticed inconsistencies on the ticket prices suggested by the Italians, which were 49% cheaper than Siemens’. “To reach Italplan’s passenger estimates, the number of railway passengers would need to rise at a rate of 10% per year, starting in 2006. Italplan’s projections aren’t realistic and there’s no chance of them being realized.”

On the billions in taxes that a bullet train would generate: “This lacks credibility: there’s no calculation chart, and in the rest of the world, bullet trains are subsidized. The reports don’t say one word about why this would be any different in Brazil.”

Deadline estimates were also criticized by the report. “It took Italy 22 years to implement its first high-speed train line, which today provides improvements to existing railways by way of adapting them to high-speed trains at a cost of 28.8 million euros per kilometer. The Working Group has accepted the claim that it would take just seven years to implement the train in Brazil. It has also accepted that the cost would reside at less than 15 million euros per kilometer. Reasoning for the increase in efficiency of the Brazilian over the Italian train project hasn’t been provided.”

The multitude of problems in the project made Fernandez question Italplan’s alleged great experience with high velocity trains: “The claim does not hold up. Its website shows only one high-speed train project carried out under its responsibility, and that’s the Rio de Janeiro–São Paulo project.”

For this story, I spoke with Salini-Impregilo,
the leading company in the consortium that built
the Milan-Turin railway, the one that Gori
and Juquinha visited in 2004. The company guarantees
that Italplan was not in the consortium.

Is there any possibility that Italplan was involved in the construction at an earlier stage? Yes. However, Salini-Impregilo says that after contacting the company directly involved in the construction process, no one seemed to recall Italplan.

I also spoke with three engineers who worked directly on the Italian Milan-Turin railway. The amnesia remains: none of the three recalled Italpan; one said they’d “never heard of Italplan or any name connected with the company.”

In an e-mail, Roberta Peccini assured me that “Italplan’s staff participated in the design and coordinated the construction of the Milan-Turin and the Rome-Florence railways.” I asked to speak with at least two company employees who had worked on either of these projects, but I received no response.

Italplan also added, in a text approved by Valec: “It should be stated that demand, investment, and financial result estimates regarding the passengers in these studies are only indicators, and not goals to be reached by interested stakeholders.” Fernandez states: “Valec verbally stated that no guarantee could be solicited from Italplan, much less offered by it, regarding the coherence, consistency, and practicality of its work.”

Money was never discussed during the marriage between Valec and Italplan, at least not in public. How much would it cost to pay the Italians for the work they had been doing since 2004? The answer was in the report approved by the Working Group, which was accepted by the Ministry of Transportation and analyzed by consultant Eduardo Fernandez. “Italplan will, after the bidding phase, hold the right to reimbursement for the cost of project development, the value of which will be determined at a later date.”

The Italians held a blank check in their hands.

A mountain of garbage

In the same year that the Federal Court of Auditors and Eduardo Fernandez published their reports, Brazil was in a state of bliss. On October 30, 2007, FIFA president Joseph Blatter handed the Word Cup trophy to President Lula during a ceremony in Switzerland. Brazil had been officially announced as the host of the 2014 World Cup, the realization of a decades-long dream to remake the 1950 World Cup. Standing before an audience of celebrities, a clearly moved Lula declared that “the world will have the opportunity to see what our people are capable of.”

The Cup rekindled hopes of a high speed train. Plans that had been postponed for decades were now being pulled out of ministry drawers. The bullet train, a symbol of the new Brazil, was in full swing during this time. There were expectations that ambitious projects like this should be implemented before the start of the tournament. The country didn’t want to bring shame onto itself before the world.

Italplan was still putting the finishing touches on the project with the Brazilian agencies when Moreno Gori spoke at the House of Representatives’ Roads and Transportation Commission in Brasilia on June 17, 2008. The audience before him made no mention of the scathing Fernandez report nor the equally critical report by the Court of Auditors. They were mostly deputies from various parties and executives from companies with an interest in the upcoming bidding process for the train, such as Alstom and Siemens. Also in in attendance was Giovanni Rocca, representative of Ferrovie Dello Stato, the state company that manages Italy’s trains.

But Gori wasn’t nervous in front of a crowd of people wearing fancy suits; he was experienced in dealing with politicians.

In 1999, Gori had offered a solution to a chronic problem in the city of Campo Grande, capital of Mato Grosso do Sul state. The city landfill had begun operating in 1992, with a projected end date of four years. But almost a decade later, it was still in operation. The situation bordered on catastrophe for André Puccinelli, mayor of Campo Grande who would be running for reelection the following year. Puccinelli, who was born in Tuscany and immigrated to Brazil as a child, decided to turn garbage into votes. In April of 1999, he signed an energy contract with the Environmental Energy Consortium Company of Campo Grande (CENAGRAN) valued at 4 million dollars a year, to be paid for by the city. The city’s energy would come from a power plant burning 400 tons of garbage a day, thereby alleviating the need for a landfill. Moreno Gori was president of that consortium, the man set to turn an environmental disaster into an ecological solution.

Within a month, the press, tipped off by a member of the city council opposition with revealing documents, was reporting that the contract between the city and the consortium had been signed without a bidding process. Arousing suspicion, the Brazilian Federal Police took up the case, investigating both the consortium and the two companies behind them: the Italian company STR Engineering and the Brazilian company Seaton. The police was working on the hypothesis that Seaton, founded just one year before the signing of the contract, didn’t have the exclusive technology needed for the service, a condition which could legally dismiss a bidding process.

Investigators focused on Gori, an acquaintance of André Puccinelli from the days when he was a federal deputy, elected in 1994. At social events, Gori was introduced as “representative of Campo Grande for the European Community.” He was well known, and so the police was surprised when they found two Brazilian identification documents among the consortium papers, one of which contained Moreno’s photograph and signature.

In the documents, Gori — who was set to charge the city 4 million dollars a year in public money — had changed his birthplace to Brazil. Other documents had been tampered with, according to investigators: In one of them, Gori was described as a biologist, despite being a civil engineer; in another, he claimed to have deposited 600 hundred thousand dollars in a Brazilian bank, funds which guaranteed that the consortium had money to operate. But the money never existed. According to the investigators, the deposit slip was also forged. The contract between the city and CENAGRAN was a bomb waiting to explode. It would last 30 years, with a penalty of 125 million dollars in the event of breach of contract. The case became known as “Garbagegate.”

André Puccinelli dissolved the partnership, but had to face a judicial process. The papers roamed the courts until 2006, when the Justice ordered a breach in bank secrecy for Moreno Gori. In the meantime, Gori made his way through offices in Brasilia, met with high-level ministers, rubbed shoulders with ambassadors and deputies, had his name submitted to regulatory and funding agencies, and by 2008, he was speaking at the House of Representatives, selling Brazil a billion dollar project.

Moreno Gori’s presentation to deputies of the House of Representatives’ Roads and Transportation Commission on June 17, 2008 was preceded by unexpected news. A month before Gori presented the Italplan project to politicians, the Garbagegate scandal was rehashed in Correio do Estado, a newspaper from Campo Grande. On May 19, they published an article titled Mastermind behind Garbagegate sells government bullet train. In the article, the newspaper named Moreno Gori and mentioned his involvement in the scandal. According to the text, the man scheduled to speak to deputies at the House session was being accused of forgery by the police and the Federal Public Prosecutor.

The article in Correio do Estado reverberated throughout the specialized media and put Italplan on alert. Roberta Peccini wrote a response in the Revista Ferroviária magazine, in which she denied Moreno Gori’s affiliation to the company.

A connection between him and the company could derail plans for the bullet train. Was Gori really just a freelancer working for Italplan in Brazil?

Roberta Peccini, Italplan’s president, owns 7.79% of the company. I spoke with another Italplan partner, who wishes to remain anonymous. According to him, everything leads to Moreno Gori. “He founded Italplan in 2002, he had the contacts in Brazil, he met with Juquinha, including at Italplan’s headquarters in Terranuova Bracciolini. We would learn everything related to the Brazilian bullet train through him,” he says.

“Good afternoon! Greetings to the present authorities and deputies,” exclaimed an excited Gori in an unerring Brazilian accent. “Our company is different from the ones that have been presented so far. We are not here to present a technology. We are an engineering company with over 25 years of experience in the rail transportation sector, particularly with regard to high-speed rail. Our personnel developed the Italian high-speed train project for the Rome-Florence line and, more recently, for the Bologna-Milan stretch.” Gori took a breath while showing slides with images of trains, rails, and sketches of revitalized areas in the decadent centers of the two largest Brazilian cities. “We call our project the Brazilian Bullet Train, the famous BBT. The line will be 403 kilometers in length; there will be three possible future stops; a possible interconnection between the train and the Guarulhos airport, and also with the Campinas and Rio de Janeiro airports; a maximum velocity in excess of 320 kilometers per hour; a commercial velocity of 285 kilometers; and a travel time of 85 minutes.”

Gori’s presentation continued for 30 minutes. The Italplan director cited exciting statistics about jobs, income and benefits to citizens, asserting the company had “interviewed 22 thousand people” and made “six thousand soil drillings to reach the entire geological and geo-technical profile” of the areas where the railroad would be implemented. To finish, Gori gave the names of all the entities that had read and reread Italplan’s documentation over the years, and named all the sheriffs of the Brazilian treasury responsible for preventing fraudulence and rip-offs. “The Brazilian government approved our project by way of the June 2005 decree. There is a federal law in the National Transportation Plan that includes a Brazilian railway network. This is a history of the Italplan project: presentation to the Ministry of Transportation; to the National Agency for Land Transport; to the newly created Transportation Commission, where the Brazilian National Development Bank was present; to the Ministry of Planning; to Valec and to the whole world. We presented the blueprint. The Working Group adopted Italplan’s project to use as a reference. We made a request to the Brazilian Institute of Environment and Renewable Natural Resources in June of 2005. We conducted the survey, as we have already said, and we conducted the basic project design, at the request of the Brazilian government. Finally, there was an economic-financial evaluation, which was approved by the Federal Court of Auditors. The project is ready to eventually go to bidding.”

It was the end of a cycle that began four years earlier. Italplan’s initial estimates had been confirmed by their fieldwork, and were being made public to an audience of government representatives, politicians, and businesspeople. The Brazilian bullet train would comprise 412 kilometers of rail, with a train running every 15 minutes at a speed of 280 kilometers per hour, thanks to the work of 140 thousand people directly or indirectly involved in its construction. It was projected that 32 million passengers would be served in the first year of operation, and almost 60 million by 2021.

On September 17, 2008, three months following Gori’s presentation in front of deputies in Brasilia, President Lula passed a law which gave more power to Valec. The law instituted changes within the state-company, already responsible for the Brazilian rail network, making it even more clear that it should “promote studies for the implementation of High-Speed Trains under coordination of the Ministry of Transportation.”

Colony of flies

The law had been in effect for just over two months when Moreno Gori was sentenced in first instance to five years in prison with work-release privileges for document forgery. He appealed, and is now free pending trial.

Inconsistencies surrounding the Italplan study and the case against its director in Brazil didn’t faze the government. In June of 2009, Dilma Rousseff, then Chief of Staff, reiterated that the bullet train would begin running during the 2014 World Cup. Rousseff knew Italplan. In 2007, she met representatives of the company in the Brazilian Embassy in Rome during an event for Italian entrepreneurs who planned on investing in the project. Her deadline was before the World Cup. “We are projecting that it will be completely ready in 2014,” stated Dilma in Brasilia during the seventh hearing of the Growth Acceleration Plan’s (PAC) works, for which the train project was the star and one of its most costly projects. Brazil had four years until the Cup’s first kick-off. However, not even the shortest of viability study projections estimated a construction period so brief. The Interglobal/Siemens/Odebrecht consortium estimated a construction period of six years.

The federal government began 2010 ready to tackle the project. In July, president Lula announced its bidding, and the auction — which would determine the builder of the bullet-train line — was set to occur at 11 A.M. on December 16 of that year, at the São Paulo Stock Exchange (Bovespa) headquarters. There, interested parties would present their bidding proposals. Even though President Lula was already considering the use of public money in the project, he didn’t miss the chance to convene a gala session in the very headquarters of Bovespa, during a year in which the Brazilian economy grew 7.5%.

“I firmly believe it’s possible to have it inaugurated by the 2016 Olympics,” said Lula, taking back his previous statements and admitting the impossibility to meet the train’s initial deadline, the World Cup. The president, in his own particular way, took the opportunity to poke fun at the critics, comparing the difficulties in building the bullet train to those faced by the designers of the Eiffel Tower: “The Tower must have faced over five thousand class action lawsuits,” he said. He was also bothered with media coverage criticizing the failure to meet the train’s initial time frame.

Lula had the support of the new Chief of Staff, Erenice Guerra. Substituting Dilma Rousseff, who was now running for the Brazilian presidency, Guerra stated confidently, “Why should we build a high-speed train? Because we can, because we are ready, because we have the firm command of the president.”

One month before submission of bids, rumors spread throughout Brasilia that Odebrecht, Camargo Corrêa and Andrade Gutierrez — three companies interested in bidding for the bullet train contract — were pressuring the government for an extension, despite a South Korean-led consortium promising a bid proposal on the preset day with a guaranteed deposit of 200 million dollars. The president resisted until November 24, when he authorized his advisers to inform the National Agency for Land Transport that the deadline had been extended.

The Brazilian Government gave companies until the middle of 2011, but the first half of that year was hit by a raging storm.

With the Public Prosecutor’s Office blocking the bidding process, political disputes in the House questioning the train’s priority, a new Senate study backing Eduardo Fernandez’ findings and even rumors that the government’s base was against the project — thus isolating recently elected president Dilma Rousseff, herself an enthusiast of the train since her days as Chief of Staff — the project was in the quagmire. A crucial point came at the beginning of July, when Transport Minister Alfredo Nascimento received an order from Dilma. The president was harsh, calling the ministry led by the Party of the Republic (PR) “out of control” and demanding the minister put an end to “a 4% toll on payments from the contractors,” according to claims in a July 2, 2011 edition of Veja magazine. In other words: bribery.

Heads rolled at the Ministry that very day, including Juquinha’s, who had reigned over Valec for almost a decade. He was removed under suspicion of corruption. In addition to Juquinha, all members in the upper echelon of the Ministry of Transportation fell from the extensive accusations of corruption. Three days later, Nascimento himself resigned.

On July 1, after a week of ministerial “cleansing,” government members were biting their nails in the salons of Bovespa, located in downtown São Paulo. The clock struck 2 P.M. It was the last call for those who wanted to present proposals in the first auction of the bullet train.

No one showed up.

The bullet train went from being the jewel of the Growth Acceleratin Plan to a colony of flies.

Back to Tuscany

Italplan continued to act behind the scenes even after the fiasco. Seeing its work discredited, with little hope of taking it to the construction site, the company sent an invoice for Valec, in the hope of receiving compensation for years of partnership. The amount hadn’t been previously agreed upon, just as the company itself had stipulated years before, with approval from the Working Group led by Valec. Italplan filled out the check as it wished, asking the Brazilian treasury for 261.7 million euros.

While waiting for payment, Italplan’s directors kept a low profile, trying to reach an agreement with Valec for what they believed was the cost of work done in Brazil. But Valec wasn’t paying, and the Italians were ignored until the beginning on 2012, when the Brazilian Embassy in Rome received a surprising notification from the local Justice in the province of Arezzo.

A judge from the district of Montevarchi —
a city of 22 thousand inhabitants in the Tuscan
countryside not far from Italplan’s headquarters —
had ordered the freezing of the Brazilian
Embassy’s accounts to pay 15.7 million euros to Italplan.

Similar court rulings have also freezed the accounts of the remaining Brazilian outposts in Italy: the Consulate General offices in Rome and Milan and the country’s Permanent Representation at FAO. The order rocked Palazzo Pamphilj — the headquarters of the Brazilian diplomatic representation in the Italian capital — a building which, ironically, was also acquired in exchange for coffee, just like the Hungarian trains.

This legal dispute led the secretary-general of the Brazilian Ministry of Foreign Affairs, Ruy Nogueira, to Rome. Nogueira is known as one of the best negotiators in the country. In his briefcase, he carried arguments from the Attorney General’s Office concerning procedural errors. One of them: Brazil had been wrongly cited. Another, more serious: the Arezzo province judge did not have judicial authority to legislate over foreign property such as embassies and consulates. Brazil’s accounts in Italy are protected by clear conventions of diplomatic immunity. The lawsuit was, at best, a careless job. After two days of meetings with Giulio Terzi, Italian minister of Foreign Affairs at the time, and Giampero Massolo, then secretary-general of the Italian chancellery, the negotiation advanced and Italplan did not get its hands on the money. The meetings took place at the Italian Ministry of Foreign Affairs.

In order to defend Valec, the Brazilian government hired Chiomenti, an Italian law firm, at a cost of 1.26 million reais. The firm did not want to be interviewed.

Less than two months after Ruy Nogueira came back to Brazil, the Federal Police knocked on the door of a luxurious home in an upmarket condo located in the Central Brazilian city of Goiania. The person that the agents were looking for was the shortest man around.

Without showing resistance, he was taken to the headquarters of the Federal Police with no handcuffs. He wore a lightly rumpled white shirt. According to investigators, Juquinha had rigged railroad bids for the North-South rail, another railroad managed by Valec. With 285 thousand dollars in assets, declared in 1998, Juquinha held property valued at 30 million dollars by the time of his arrest. “It is money incompatible with his salary,” said the federal prosecutor for the state of Goiás, Helio Telho, in charge of the lawsuit.

On December 19, 2012, Dilma pulled the bullet train from Valec’s management and revoked the passage in Lula’s presidential law authorizing the state-company to “promote studies for the implementation of high-speed trains.” The project was directed to another agency connected to the Ministry of Transportation, the Planning and Logistics Company S.A. Shaken by accusations of corruption and a failed bidding process in its most important mission, Valec was officially out of the bullet train project.

Between 2004 and 2014, Valec expenses such as “personnel, financing, and financial investments” cost Brazil almost 5 billion dollars of public money. During investigations of the “Pay Train Operation” (Operação Trem Pagador), the same operation that led to the arrest of Juquinha, the Federal Police estimated that up to half a billion dollars of the budget may have been diverted just for one of Valec’s projects, the North-South railroad. The proceeding is currently awaiting trial. Juquinha denies all accusations.

In Brazil, Italplan’s legal fight ended on February 1, 2013, when the president of Brazil’s Superior Court of Justice, Felix Fischer, denied payment of services from Valec to Italplan due to “offenses against public order and national sovereignty.” In his decision, Fischer made clear that Italplan failed to submit any type of contract showing formal ties with Valec.

Did Italplan make a basic mistake in the judicial process, forgetting to attach the Italplan-Valec contract, the only resource that could provide legitimacy to its 261.7 billion euros dispute?

While checking facts for throughout the validation of this story, many questions have been answered using documents and interviews. More than 30 people have agreed to speak with me, which I’m thankful for. This includes those who wished to remain anonymous. In the meantime, as it is usually the case with complicated, multi-layered topics, many other questions have arisen — and remain, at least for the time being, unanswered.

Why did Valec and the Ministry of Transportation never bother to know more about the directors fronting Italplan, especially Moreno Gori? Why didn’t they perform more thorough checks on the bullet train projects that Italplan claimed to have designed and implemented? Why was the Eduardo Fernandez report, a scathing document concerning the infeasibility of the project, ignored for so long? Why were the judgments of the Federal Court of Auditors, a document which agreed with and amplified the conclusions of the Fernandez report, ignored? Why, in spite of serious concerns raised about Italplan’s study, did Lula and then Dilma move ahead with plans for construction, even in the face of impossible deadlines (the 2014 World Cup)? How is it possible that Valec and Italplan maintained a partnership for years without signing a contract to account for basic matters such as service fees? If such contract exists — and apparently it doesn’t — the company was not willing to send it to me.

These questions can be explained in part by communication difficulties between the many actors of the enormous Brazilian public machine, by the lack of people able to give attention to the red flags laid along the way, by the lack of technical knowledge of the politicians in charge of realizing the project, and by an almost irrational enthusiasm for the construction of a magnanimous project to present during the World Cup.

Of course, these questions can also be explained through other, more torturous paths.

Publicly, no inquiries have been made concerning the Brazilian bullet train.

WHERE ARE THEY NOW?

Moreno Gori
We tried to locate Gori for months, without success. A partner at Italplan, who wishes to remain anonymous, claims to see Gori only “during financial meetings,” the last of which occurred in August, 2014. His lawyer in Brazil claims to be unaware of his present location. Gori awaits a final opinion from Hélio Nogueira, a Brazilian federal judge, on his forgery accusations. The case has been in courts for 15 years without a definitive trial.

Roberta Peccini
On February 18, 2015, Peccini answered my questions — eight of them — by email. After further questions were made, she did not say a word, even after repeated contact attempts. She is hoping to revert the decision of the Brazilian Justice and receive a compensation for Italplan’s work in Brazil. Peccini also claims that the Italian Supreme Court will be evaluating the Italplan vs. Valec case.

José Francisco das Neves
Juquinha’s assets were blocked by the Justice on account of the Pay Train operation. In 2008, in front of a group of deputies, Juquinha declared: “I put in place the North-South rail while dealing with a quadruple bypass surgery, without any bidding process…” He corrected himself: “What I mean is, I did bid everything for that railway, but I couldn’t even do that with the bypass surgery.” Three days after leaving Valec on corruption charges, Juquinha was awarded the Citizen of Palmeiras de Goiás honor in his hometown. The governor of the state, Marconi Perillo, who’d grown up in the city, was in the event. He had already honored his friend Juquinha in February, with the Anhanguera Merit award.

I have tried to contact Juquinha’s lawyer, without success.

Italplan
Legally, the company still exists. One of its partners told me, however, that it’s no longer in operation. According to the source, the company only meets for compulsory annual assemblies. “I don’t know how the case against Valec is going, but Italplan wasn’t a fraud. We did the project,” he says. The company’s headquarters in Terranuova Bracciolini, Italy, have been closed. “No one comes here and the office is empty,” says the secretary of a neighboring firm.

Gianfranco Simoncini, adviser for Productive Activity, Credit, and Labor in the Tuscany Region, said through an assistant that he stopped following the case after the unfreezing of the Brazilian Embassy’s accounts in Rome. He also says that he has no more contact with members of Italplan. Simoncini has previously supported Italplan in the Italian Ministry of the Interior, calling it “an excellent company we need to save” in 2010. Italplan’s website was up and running, listing the Brazilian train as one of its projects. In the middle of 2014, however, it was hacked by a Moroccan going by the name of Røøfix-fox. The hacker did not respond when contacted for this story.

Siemens
Though Italplan won the viability study, Siemens believed it could participate in the construction of the bullet train. An email from 2007, sent by Siemens executive Nelson Branco Marchetti to the company headquarters in Germany, says: “we have the future project of the HST (High Speed Train) Rio-SP (bullet train) that will establish an enormous consortium of civil constructors led by Odebrecht.” Marchetti was present during the House of Representatives’ Roads and Transportation Committee meeting in 2008, when Moreno Gori presented the Italplan project to members of the committee. Siemens, however, was involved in a corruption scandal in 2013. In exchange for reduced penalties, the company admitted to paying bribes to government authorities from the Social Democratic Party (PSDB) in São Paulo, and to forming a cartel with other companies in public biddings since the 1990s for the sale and maintenance of subway and metropolitan trains.

The bullet train

An auction for bidding of the bullet train construction, slated for August of 2013, was once again delayed. Just one competitor showed interest in backing the project, with the use of public money. During a news conference, the president of the Planning and Logistics Company (EPL), Bernardo Figueiredo, who now runs the train project, said that Siemens’ revelations concerning the metro cartel in São Paulo have encouraged the government to delay the bidding process further. But the government hasn’t given up on high speed rail. A new call for tender is expected in 2016.

A train to Bangladania might yet whistle on the horizon.

Click here to download all public documents used in this research.