March 22, 2016 / 10:48 AM / a year ago

Odebrecht cooperates with Brazil probe after bribe scheme exposed

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Executives of Odebrecht SA, are escorted by federal police officers during their transfer to Curitiba city as they leave the Federal Police headquarter in Sao Paulo, Brazil, March 22, 2016.Paulo Whitaker

SAO PAULO (Reuters) - Grupo Odebrecht SA [ODBES.UL], the engineering firm at the heart of Brazil's biggest ever graft probe, on Tuesday agreed to cooperate with prosecutors, in a move likely to send shockwaves across political parties that for years illegally siphoned money from state contracts.

Executives at Salvador, Brazil-based Odebrecht targeted by the probe, known as "Operation Car Wash," will ask for plea bargain deals with prosecutors, a company statement said. It marked a radical shift for Odebrecht, which had previously done little to cooperate in the two-year-old probe. The company said the decision was made to help "build a better Brazil."

The news came as the team of investigators in the probe on Tuesday uncovered systematic corruption at Odebrecht, with an office to pay bribes on work for World Cup soccer stadiums and Olympics legacy projects. Raids carried out at dawn uncovered a parallel bribery scheme that helped extract money from state-controlled oil producer Petróleo Brasileiro SA, or Petrobras PETR4.SA..

Several top executives and politicians have already been imprisoned in the case, which could help topple President Dilma Rousseff, who is facing impeachment proceedings for an unrelated matter involving alleged illegal mismanagement of the budget.

Rousseff's political mentor and predecessor, Luiz Inácio Lula da Silva, has been charged with money laundering and fraud. A top senator who also sought a plea deal recently said Rousseff, a former Petrobras chairwoman when much of the alleged graft took place, knew about the scheme.

Both Lula and Rousseff deny any wrongdoing.

"In spite of all the difficulties and the conscience that we are not fully responsible for the facts that Operation Car Wash investigates - which reveal the existence of an illegal and illegitimate political and electoral fundraising system, - we continue to believe in Brazil," the note from Odebrecht said.

The political crisis comes as Brazil grapples with its steepest economic recession in decades and an epidemic of the mosquito-borne Zika virus, just as Rio de Janeiro prepares to host the Olympic Games in August.

Odebrecht is the largest of Brazil's major engineering firms accused of colluding to overcharge Petrobras for work and using the excess as bribes that were funneled to ruling coalition politicians and, in some cases, Rousseff's opponents.

Carlos Fernando dos Santos Lima, one of the case's lead prosecutors, said on Tuesday there is evidence of bribes paid on soccer stadiums built to host the 2014 World Cup, and in particular São Paulo's Arena Corinthians.

"There is a system, it's even automated, to control these payments in the oil and gas sector, infrastructure, football stadiums," he said.

Family Scion

Prosecutors said Marcelo Bahia Odebrecht, the company's former chief executive officer and scion of the namesake family that controls the firm, had continued to run the scheme after his June arrest. He was sentenced to 19 years in prison this month after being convicted of corruption and money laundering.

An engineer with a degree in finance, Odebrecht turned the conglomerate into Brazil's largest employer and one of the top-five private-sector groups. He is a staunch backer of Lula and Rousseff and lauded their efforts to help local groups grow globally.

According to Veja magazine's Radar column, Marcelo Bahia Odebrecht had already begun to testify before Car Wash prosecutors launched Tuesday's raids.

One of four siblings, Marcelo presided over a golden era for the group since succeeding his father Emilio in late 2008. Grupo Odebrecht, which now spans 15 divisions spread across two dozen countries, is choosing to cooperate with the probe to help preserve the jobs of more than 130,000 employees, its statement said.

Grupo Odebrecht, founded by Marcelo's grandfather in the mid-1940s, was involved in building or refurbishing at least four of Brazil's 12 World Cup stadiums, including the 1 billion-real ($278 million) Arena Corinthians, which hosted the opening match and will also host Olympic soccer games.

Police also said on Tuesday they are looking into bribes at the Porto Maravilha, or Marvelous Port, a regeneration of Rio de Janeiro's downtown port area that has been heralded by authorities as one of the great legacies of the Olympics.

The Petrobras probe has led Lima and fellow prosecutors to find fraud in other government contracts and bribes in countries like Argentina and Angola.

"Clearly, 'Car Wash' has a focus in Petrobras, but we are combating corruption, if we have evidence of corruption in any company, in any party and in any government, we are going to pursue the investigation," Lima said.

Additional reporting by Silvio Cascione and Anthony Boadle in Brasilia and Eduardo Simões and Tatiana Ramil in São Paulo; Editing by Andrew Hay and Richard Pullin

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