Operation Carwash Task Force
Ministério Público Federal do Brasil

A. Problem Analysis

 1. What was the problem before the implementation of the initiative?
As reported by the Corruption perceptions index of 2016, no country got close to a perfect score in terms of absence of corruption. Actually, most of the 176 countries and territories analyzed scored below than the midpoint of the scale used as a parameter. The average score was 43 points in a scale from 0 to 100, which clearly shows the world’s endemic corruption. In Brazil, which scored 40 last year in the aforementioned index, corruption manifests itself in different ways in the public and private spheres. Petty corruption affects the daily lives of individuals while major corruption schemes implicate public officials and major corporations in anything from small public works to nation-wide infrastructure efforts such as the 2014 FIFA World Cup. A study from the Federation of Industries in the State of São Paulo (FIESP) estimated that corruption cost Brazil between 20 and 30 billion USD in 2012, approximately 2% of the GDP. Political corruption is one of the most widespread practices, commonly performed as bribery and embezzlement of public funds through overbilling. Those are usually closely linked to the distribution of public contracts among private enterprises through cartel schemes. Public construction works are the prime example and a very attractive field, since huge roads, sewages, public buildings and infrastructure projects involve massive amounts of money. Corruption has been historically under-reported and under-investigated, with few prosecutions and even fewer punishment. This changed when the investigation and prosecution of the Mensalão and Petrobras corruption schemes led to the sentencing and imprisonment of major politicians and the CEOs of the largest contracting companies. Brazil was in need of a pioneering and innovative initiative to fight large-scale corruption. Operation Carwash was designed with all this background in mind. The idea was to choose a focus point to start to unveil the intricate puzzle of political corruption in the country, in particular with regards to governmental participation in major corruption schemes backed by major private companies. Those large companies used to form cartels and bribe the CEOs of the nation’s most important oil company, Petrobras, and also pay off public agents in order to be selected at Petrobras public biddings. The bids and winners were previously agreed on by construction companies in secret meetings. Prices were inflated and public officials received a share. Petrobras employees were responsible for guaranteeing that only these construction companies would be invited to the public bidding process. The funding operators (“doleiros”) used to have the role of hiding the origin of the money and making it look legal. Public officials, connected to political parties, maintained the scheme by appointing the “right” people as heads of Petrobras. They would receive in return bribes in the amount of 1 to 5% of the overpriced contracts. Such institutionalized corruption system unveiled by the Carwash operation was in place for at least ten years, benefiting major construction companies and corrupt politicians.

B. Strategic Approach

 2. What was the solution?
A major taskforce was assembled to investigate corruption at the giant state-run oil company Petrobras. Members of the federal prosecution office (MPF) and the federal police in different states came together, planned, executed and oversaw a nationwide investigation on hundreds of suspects with levels of cooperation never seen before, both nationally and internationally. The investigation reached the highest levels of Brazilian government and major business players from the construction and engineering industries.

 3. How did the initiative solve the problem and improve people’s lives?
There are at least three ways in which the MPF’s taskforce initiative in Operation Carwash significantly improved people’s lives. First, it significantly eroded the Brazilian long-lasting culture of impunity, in which the rich and powerful break the law without fear of punishment. The investigation and prosecution of major public and private figures brought about by Operation Carwash sparkled a transformation in Brazil. The negative perception of impunity has given place to hopes of real change as the most powerful executives in the country are for the first time ever answering for their crimes. The seniority of public officials already imprisoned or being prosecuted is also unmatched in Brazilian history: from former governors of the state of Rio de Janeiro to the former head of the House of Representatives, as well as the current and two former Presidents. Second, it positively impacted Brazilian economy and thus improved the life of all Brazilian citizens. Corruption directly impairs individual well being as it reduces or prevents public investment in health, education, infrastructure, security and housing, among other essential rights, expanding social exclusion and inequality. The initiative promoted by the MPF taskforce fought the misuse of a significant amount of public funds and also recovered large sums from abroad. It ultimately contributed to reduce social exclusion and inequality. The aforementioned corruption perception index specifically pointed out the case of Petrobras as one of systemic grand corruption, which violated human rights, prevented sustainable development and fueled social exclusion. It was indicated as one of the most important causes of Brazil’s poor score. Another way in which the Operation could be seen to produce tangible economic results is that it tends to reestablish competition in efficiency terms. In the context before the Operation, firms would get public contracts due to the relations they had with relevant politicians. Many companies have succeeded and achieved great results while receiving from the public sector favors and benefits that were not extended to their competitors. In view of such a huge Operation, this logic tends to change. Third and finally, the taskforce improved the lives of Brazilians by positively impacting the country’s democracy, as it interrupted a scheme of illegal electoral campaign financing. In doing so, the initiative prompted discussions on legislative reforms that would help the Brazilian democratic to better represent the choices and preferences of its citizens and raise their confidence in the rule of law. After all, corruption was one of the tension points that led to the political crisis and protests in the country in 2013.

C. Execution and Implementation

 4. In which ways is the initiative creative and innovative?
First, the Operation Carwash required an enormous effort to coordinate dozens of public institutions in many different cities. The Operation was led mainly by the Federal Public Prosecutors and the Federal Police, but received contributions from, among others, the Antitrust Agency (CADE), the Department of Federal Revenue, the Council for Financial Activities Control (COAF) and the Comptroller General of the Union (CGU). The Task Force relied also on the cooperation of institutions from different countries in order to find the necessary proof to prosecute the suspects. Second, the Task Force made unprecedented and very clever use of plea-bargaining agreements, from which it gathered a great amount of information from individuals under investigation. Third, the Task Force understood the importance of public communication. Many important steps of the operation were explained and presented in the media. It also published a website with data on the Operation (http://lavajato.mpf.mp.br/). It triggered support of a large portion of Brazilian society. These strategies were crucial and implemented with little legislative change – they were rather a result of a change of attitude from a well paid and very well educated new generation of public servants, with a mindset of cooperation and problem-solving.

 5. Who implemented the initiative and what is the size of the population affected by this initiative?
The Federal Public Prosecutor's Office (in Portuguese: Ministério Público Federal, usually referred to as "MPF") is a Brazilian body of independent public prosecutors at the federal level that operates autonomously from the other three branches of government. It functions as a “fourth branch", mainly performing the duty to bring selected (mainly criminal) federal cases of public interest before federal judges and appellate, superior and special courts. Although the law allows federal prosecutors to conduct any federal criminal investigations, they only do so in major cases, usually where there has been wrongdoing involving the police or public officials. They are also usually in charge of supervising police work and police investigations. In addition to prosecuting federal crimes, Brazilian federal prosecutors are also authorized by the Brazilian Constitution to bring action against private individuals, commercial enterprises and the federal, state and municipal governments, in the defense of minorities, the environment, consumers and civil society in general. In 2014, during the first stage of the investigations, after the federal police gathered enough evidence, MPF went before the Federal Court in Curitiba to investigate further and prosecute four criminal organizations led by money laundering professionals, operators on the parallel black exchange market. One of the southern branches of the Federal Prosecutor's Office (the MPF from the state of Paraná) collected evidence of an immense criminal scheme of corruption involving Petrobras. The taskforce was then created in order to act as a major investigative team of attorneys general. While the coordinating attorneys are in Paraná, the group is composed of MPF members from several states. Investigation of such a major corruption scandal has national implications and affects the entire population. In latest developments, several chief executive officers and other senior executives from major construction conglomerates have been arrested and accused of knowing that their companies paid bribes to politicians that added up to 710 million reais (USD 230 million). The entire money laundering scheme behind this entangled corruption case is suspected of moving more than R$30 billion (approx. US$ 9 billion, as of November, 2016).
 6. How was the strategy implemented and what resources were mobilized?
The taskforce developed many different procedures to implement the investigation strategy during Operation Carwash. It all started on July 2013, with phone interceptions that revealed four interconnected criminal organizations. On March 2014, the team activated the first phase of the operation. Federal Attorney General Rodrigo Janot appointed a group of federal prosecutors to analyze the seized material, including bank details of those involved in the scheme. This resulted in the first charges against the suspects. In the end, the first phase encompassed 12 criminal prosecutions against 74 offenders for crimes against the Brazilian Financial System committed within the framework of a criminal organization, as well as money laundering, embezzlement and corruption. The federal prosecutors requested court blocks on all of the accuseds’ assets, which totaled more than R$ 50 million (USD 16 million). In the second phase the taskforce advanced on the investigations on Petrobras, which only became possible with the cooperation of foreign institutions such as Switzerland's prosecution office. It informed Brazilian prosecutors that Paulo Roberto Costa, a former manager of Petrobras, had more than US$ 23 million in Swiss bank accounts, an amount of money incompatible with his declared income – which was therefore blocked. After this, the taskforce took another major step forward with Paulo Roberto Costa’s plea-bargain agreement. He helped the taskforce understand the facts in detail in exchange for agreed benefits. He also made the commitment of returning all the illicit payment received, revealing all the crimes committed and appointing others involved in the scheme. This deal created a domino effect, with the other suspects also deciding to cooperate with the investigation in exchange for benefits. Those agreements were essential to the success of the operation, and ensured it enormous and increasing leverage on further deals. The statements and evidence collected due to the agreements as well as the analysis of the seized material, documents and bank details enabled the investigation to move on to big companies that were bribing public officials. On November 2014, the Federal Police, together with the Federal Revenue Agency, implemented warrants of pre-trial detention, temporary imprisonment, search and seizure and coercive conduction (“bench warrant”) in different cities, especially at big and renowned construction companies such as Engevix, Mendes Júnior Trading Engenharia, Mendes Júnior Trading Engenharia, Grupo OAS, Camargo Correa, Galvão Engenharia, UTC Engenharia, IESA Engenharia, Construtora Queiroz Galvão and Odebrecht Plantas Industriais e Participações. The estimated value payed as bribery was close to R$ 300 million (USD 96 million). On December 2014, federal prosecutors initiated proceedings against four other people, including Nestor Cerveró, a former manager of Petrobras, for corruption in public procurement. The amount of money involved this time was US$ 53 million. He was arrested in January 2015. The operation also impacted Brazilian political parties. Important authorities were investigated and punished for participating in the corruption scheme. For instance, Joao Vaccari Neto, the former treasurer of the Workers’s Party, was arrested for receiving illicit donations. José Dirceu, former chief of staff for President Lula, was arrested for commanding a big part of the scheme. The former President of the Chamber of Deputies, Eduardo Cunha, was also arrested and is under investigation for the reception of bribes in the amount of more than USD$40 million. Former President Lula was detained and questioned for three hours and is also under investigation.

 7. Who were the stakeholders involved in the design of the initiative and in its implementation?
MPF Task Force in Paraná is a research team formed by federal attorneys general who are in the forefront of the investigations in the trial court level of the Federal Court of Paraná overseeing Carwash Operation. The team was appointed by the Attorney General of the Republic, Rodrigo Janot, in April 2014 and is composed of Attorneys General Deltan Martinazzo Dallagnol, Carlos Fernando dos Santos Lima, Orlando Martello Junior, Athayde Ribeiro Costa, Diogo Castor de Mattos, Roberson Henrique Pozzobon, Paulo Roberto Galvão, Júlio Carlos Motta Noronha, Laura Tessler, Isabel Cristina Groba Vieira, Jerusa Burmann Viecili, Januário Paludo (joined the team and now acts as collaborator), Antônio Carlos Welter (joined the team and now works as a collaborator) and Andrey Borges de Mendonça (joined the team and now works as a collaborator).

 8. What were the most successful outputs and why was the initiative effective?
As expressed in the answer to question three, some of the most important outcomes produced by the Operation Carwash are difficult to measure. Indeed, (i) it impacts the long-lasting culture of impunity in Brazil, raising the hope of equal treatment and prosecution of the powerful; (ii) it produces relevant outcomes in Brazilian economy, insofar as public funds are saved from corruption like never before; and (iii) it improves Brazilian democracy, disrupting a major scheme of illegal electoral campaign financing. Other more concrete and objective outcomes of the Operation are: 1 - Total amount of requested compensation (including fines): R$ 38.1 Billion (USD 12.2 billion). The crimes already reported involve the payment of bribes of approximately R$ 6.4 billion (USD 2.05 billion). R$ 10.1 billion (USD 3.24 billion) were recovered through leniency agreements; R$ 756.9 million (USD 243 million) repatriated and R$ 3.2 billion in defendants' assets were blocked (USD 1.02 billion). 2 - 125 convictions, counting 1,317 years and 21 days of imprisonment. 3 - 71 plea-bargaining procedures with individual defendants and 9 leniency agreements with companies 4 - 131 applications for international cooperation, of which 103 active applications for 31 countries and 28 passive applications with 15 countries.

 9. What were the main obstacles encountered and how were they overcome?
Operation Carwash affected many powerful people in Brazil. Among those that ended up in jail are Eike Baptista (once the richest person in the country), Marcelo Odebrecht (the owner of the largest Brazilian construction company), and some very influential politicians (such as José Dirceu, former chief-of-staff of President Lula, and Antonio Palocci, former Finance minister of President Lula and former chief-of-staff of President Dilma Roussef). The unprecedented reach of the operation led to a backlash by politicians. Two of the most important were (i) the nomination of former President Lula by then President Dilma Rousseff to a Minister position, a move that was perceived as a way to displace the judgment of his case to the Brazilian Supreme Court; (ii) the Senate crippled a bill to fight corruption, which was backed by millions of signatures, as well as the MPF and personally supported by the Carwash taskforce. In both cases, the obstacles were overcome largely as a result of public pressure. Both events were followed by massive demonstrations of support for the taskforce and Operation Carwash.

D. Impact and Sustainability

 10. What were the key benefits resulting from this initiative?
There are at least three ways in which the MPF’s taskforce initiative in Operation Carwash significantly improved people’s lives. First, it significantly eroded the Brazilian long-lasting culture of impunity, in which the rich and powerful break the law without fear of punishment. The investigation and prosecution of major public and private figures brought about by Operation Carwash sparkled a transformation in Brazil. The negative perception of impunity has given place to hopes of real change as the most powerful executives in the country are for the first time ever answering for their crimes. The seniority of public officials already imprisoned or being prosecuted is also unmatched in Brazilian history: from former governors of the state of Rio de Janeiro to the former head of the House of Representatives, as well as the current and two former Presidents. Second, it positively impacted Brazilian economy and thus improved the life of all Brazilian citizens. Corruption directly impairs individual well being as it reduces or prevents public investment in health, education, infrastructure, security and housing, among other essential rights, expanding social exclusion and inequality. The initiative promoted by the MPF taskforce fought the misuse of a significant amount of public funds and also recovered large sums from abroad. It ultimately contributed to reduce social exclusion and inequality. The aforementioned corruption perception index specifically pointed out the case of Petrobras as one of systemic grand corruption, which violated human rights, prevented sustainable development and fueled social exclusion. It was indicated as one of the most important causes of Brazil’s poor score. Another way in which the Operation could be seen to produce tangible economic results is that it tends to reestablish competition in efficiency terms. In the context before the Operation, firms would get public contracts due to the relations they had with relevant politicians. Many companies have succeeded and achieved great results while receiving from the public sector favors and benefits that were not extended to their competitors. In view of such a huge Operation, this logic tends to change. Third and finally, the taskforce improved the lives of Brazilians by positively impacting the country’s democracy, as it interrupted a scheme of illegal electoral campaign financing. In doing so, the initiative prompted discussions on legislative reforms that would help the Brazilian democratic to better represent the choices and preferences of its citizens and raise their confidence in the rule of law. After all, corruption was one of the tension points that led to the political crisis and protests in the country in 2013.

 11. Did the initiative improve integrity and/or accountability in public service? (If applicable)
For a long time Brazilians have complained about impunity in relation to large-scale corruption in the government, and many thought this was a governmental feature the country had to live with, as part of the political system. That has changed with Carwash Operation. With the end of impunity, a cultural shift occurred and allowed the population to understand that laws can define what corruption is and be used to fight it. In particular, leniency agreements, which were used in the 1990s with heinous crimes, were used against such type of organized crime because the law expanded the possibility for their application in such cases, and political institutions were strengthened in legal terms and reinvigorated by a political will to fight impunity in terms of corruption. In addition to that, preventive detention of individuals for investigation, prosecution and negotiation of leniency agreements has increased the perception of the population that impunity is no longer the rule when it comes to corruption and, therefore, there is a noticeable improvement on integrity and accountability in public and private institutions. As a consequence of the operation, compliance practices have been a trend topic and anti-corruption programs are spreading fast among companies and public establishments.

 12. Were special measures put in place to ensure that the initiative benefits women and girls and improves the situation of the poorest and most vulnerable? (If applicable)
The Operation Carwash has not put in place special measures to benefit women and girls, but by its very nature it improves the situation of the poorest and most vulnerable people. There are two reasons for this. First, the poorest are the ones who depend the most on public expenditure and on public services. The huge amount of money that was being drained through the channels of corruption in schemes such as the one unveiled by Operation Carwash could otherwise be invested in the improvement of such services, benefiting the poorest. Second, because the Operation also serves to improve the Brazilian Electoral system, that the unveiled scheme was defrauding. The bribes paid by these construction companies to politicians tended to turn into policies that benefited these companies exclusively, instead of the population at large.

Contact Information

Institution Name:   Ministério Público Federal do Brasil
Institution Type:   Public Authority  
Contact Person:   Deltan Dallagnol
Title:   Leading Federal Prosecutor of the Task Force  
Telephone/ Fax:   +55 41 32198767
Institution's / Project's Website:  
E-mail:   deltan@mpf.mp.br  
Address:   Rua Marechal Deodoro, 933
Postal Code:   80.060-010
City:   Curitiba
State/Province:   Paraná
Country:  

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