Shocked! Shocked! Brazilian Contractors Rewarded for Failure!

“On being a businessman: The thoughts of Norberto Odebrecht.” The key: invest heavily in, ahem, proactive risk transfer.

Gautama e OAS se uniram para levar R$ 540 milhões no Maranhão (Estado de S. Paulo): The investigation of a civil engineering firm that allegedly paid bribes and kickbacks to secure vast public works contracts — Brazilians are shocked! shocked! that this sort of thing could have been going on under their noses all these years! — now widens to include another major contractor, OAS.

You recall that a sex scandal involving the President of the Brazilian Senate involved alleged ties with another big construction firm, Mendes Júnior. See Veja: The Senator Had Sex! But Is He Screwed?

Mendes and OAS are part of the Yellow Line Consortium that produced the Great Smoking Hole of Pinheiros in January while building an extension to the São Paulo subway system. We live in the Pinheiros area, by the way. See “In Hell, The Engineers Are Brazilan and the Musicians Are German.”

And Mendes was the subject some years ago of an autohagiography by proxy by business “journalist” Leonardo Attuch — who later reportedly coordinated with Daniel Dantas to publish articles supporting Dantas’ attempt to maintain control of Brasil Telecom.

Attuch portrayed the firm’s chief executive in terms similar to those used by Oriana Falacci to ennoble Aristotle Onassis or Ayn Rand used to exalt John Galt. See The Crucifixion of Leonardo Attuch.

See also Crooked Journos: Continental Precursors. On Brazilian autohagiography by proxy as a literary genre and corporate communications strategy, see also Frias: Speaking Well of the Banana-Republican Dead and Brazil: Editor Fired Over Frías Anti-Hagiography.

No rastro de Zuleido Veras, apontado como pivô da máfia das obras, a Polícia Federal mira um negócio de R$ 540 milhões – em valores atualizados – no Maranhão que ele dividiu com a Construtora OAS. Foi no governo Roseana Sarney (hoje no PMDB, na época no PFL).

On the trail of Zuleido Veras, who is accused of being the key man in the mafia of public works, the federal police have their eye on a deal with OAS Construction in Maranhão worth R$540 million (US$285 million) — in current values. The deal was signed during the governship of Roseana Sarney (currently in the PMDB, in the PFL at the time).

A meta inicial da investigação federal era descobrir como a empreiteira de Zuleido, a Gautama, foi acolhida pelas administrações José Reinaldo Tavares (PMDB) e Jackson Lago (PDT), alvos da Operação Navalha. Os federais descobriram, então, que, em parceria com a OAS, a Gautama chegou bem antes por lá, quando o Maranhão ainda era domínio quase exclusivo do clã Sarney.

The original goal of the investigation was to discover who Zuleido’s contracting firm, Gautama, was accomodated by the administrations of Tavares (PMDB) and Lago (PDT), both targets in Operation Straight Razor. The feds then discovered that Gautama, in partnership with OAS, got there much earlier, when Maranhão was still the nearly exclusive domain of the Sarney clan.

Foi em 2000, quando a Companhia de Águas e Esgotos do Maranhão (Caema), por força de convênio com o Ministério da Integração Nacional, contratou as empreiteiras para a obra da Adutora Italuís II, orçada então em R$ 300 milhões.

It was in 2000, when CAEMA (the Maranhão Water and Sewer Company), under a deal with the Ministry of National Integration, hired the two firms to build the Italuís II [big pipe], with a budget of R$300 million.

A OAS e a Gautama dividiram meio a meio o bolo. A OAS pegou um trecho de R$ 151 milhões, a Gautama outro, de R$ 149 milhões. A União seria a principal fonte do desvio, não fosse uma ação cautelar movida pelo Ministério Público Federal que embargou pagamentos em favor das empreiteiras.

OAS and Gautama divided the cake in two. OAS took one stretch of the pipeline for R$151 million and Gautama took another for R$149 million. The federal government might have been the principal source of misappropriation were it not for an injunction applied for by the federal public advocate that stopped payment to the two contractors.

Just as the TCU recently stopped payment for the one operational segment of the Beltway project in São Paulo recently. See São Paulo Crosstown Traffic: Beancounters Bork Alckmin Big Dig!

Dados oficiais indicam que a OAS e a Gautama receberam R$ 31 milhões antes que a Justiça mandasse interromper os novos repasses. A parceria das empreiteiras, que Roseana acolheu, revela que, apesar das suspeitas de que a Gautama teve origem em briga interna da OAS, as duas andam lado a lado quando estão de olho em obras de grande porte, com recursos do Tesouro.

Official data indicate the OAS and Gautama got R$31 million before the court ordered the suspension of new payments. The partnership, which Roseana signed off on, reveals that, despite suspicions that Gautam arose out of an internal dispute within OAS, the two operate hand in hand when it comes to projects on a large scale funded by the public treasury.

O ajuste ficou mais evidente porque as duas empreiteiras indicaram um de seus diretores para assumir a presidência da Companhia de Águas e Esgotos do Maranhão.

The accomodation became more obvious when the two contractors nominated one of their directors to serve as president of Maranhão Water & Sewer.

I don’t quite get that. Are you saying they had interlocking directorates? ‘Magina!

A Italuís II, duplicação do sistema de captação e tratamento de água para abastecimento da capital, mal saiu do papel. Foram executados apenas 12% do total da obra. O Tribunal de Contas da União identificou “indícios de irregularidades graves”, como superfaturamento.

Italuís II, which would have double water treatment capacity for the capital city, never got off the drawing table. Only 12% of the project was executed. The TCU identified “indications of grave irregularities,” including overbilling.

Os auditores alinharam o que encontraram de errado: “Projeto básico deficiente, sobrepreços, valores e composições inadequados de BDI (benefícios e despesas indiretas), ausência de licitação autônoma para aquisição de equipamentos.”

The auditors underscored what they found wrong: “Basic project deficient; overpricing … lack of independent bidding process for acquisition of equipment.”

Eles também apontaram “fortes suspeitas” sobre a regularidade do licenciamento ambiental. Em fevereiro de 2003, a Justiça Federal mandou parar tudo. Hoje fazem parte do cenário maranhense dois canteiros repletos de tubulações e equipamentos a céu aberto. A decisão foi tomada pelo juiz Wellington Claudio Pinho de Castro, da 5ª Vara Federal de São Luís, que anulou os contratos decorrentes da licitação 029 e condenou a Caema e o Estado do Maranhão, solidariamente, ao ressarcimento dos recursos até então liberados.

They also pointed out “strong suspicions” about the regularity of the environmental licensing. In Feb. 2003, a federal court ordered a halt to the project. Today, the landscape of Maranhão features two construction yards full of piping and equipment, exposed to the elements. The decision was by Judge Pinho de Castro of the 5th Bar in San Luís, who cancelled the contracts signed under Bid No. 029 and sentenced CAEMA and the state government, jointly, to repay the funds allocated to the project up to that point.

75%

75%

A ordem judicial se baseou nos relatórios dos auditores do TCU, que apontaram sobrepreços de 75% no contrato 72/2000 (contrato da OAS), e de 15% no contrato 71/2000 (da Gautama). O levantamento teve como parâmetro o Sistema Nacional de Pesquisa de Custos e Índices da Construção Civil (Sinapi).

The judicial order was based on audit reports from the TCU who pointed to overpricing by 75% in contract No. 72/2000 (OAS) and 15% in contract 71/2000 (Gautama’s half of the project). The figure was arrived at based on data from SINAPI, the National System of Civil Engineering Prices and Indices Survey.

Analisando a conduta das empreiteiras, os peritos de contas denunciaram “indícios de conluio na licitação, evidências de relacionamento entre os sócios da OAS e da Gautama”.

Analyzing the conduct of the contractors, the [TCU beancounters] charged that there were “signs of collusion in the bidding process, evidence of relationships among the partners of OAS and Gautama.”

Pelo TCU, documentos mostram que os sócios das duas participavam da composição de terceira empresa estranha à concorrência, contratada para elaborar o projeto básico. “Verificou-se direcionamento da licitação do projeto básico, custeado com recursos estaduais, havendo fraude na documentação”, assinalaram os auditores.

Documents from the TCU show that partners in the two firms played a role in selecting a third firm to elaborate the basic plan, without competition. “The bidding for the basic plan was demonstrably rigged, paid for with state funds, and there was fraud in the documentation,” the auditors said.

“A elaboração do projeto executivo a cargo da OAS e da Gautama chega a ser temerário, ante o porte da obra e os valores envolvidos, e também ilegal, dada a subcontratação de empresa para fazer os projetos, sem observância da Lei de Licitações”, advertiu o TCU.

“The …”

O empreendimento de mais de meio bilhão de reais, em valores atualizados, que o governo Roseana contratou enfrenta três ações judiciais. Uma na Justiça estadual – ação civil, em razão de falhas no Estudo de Impacto Ambiental. Duas da alçada do Judiciário Federal – uma obriga a União a suspender repasses para a obra. A outra proíbe a continuação da obra.

The project, contracted by the Roseana Sarney government and worth R$500,000,000 in current reals, faces three lawsuits: One in a state court — a civil suit over failures in the environmental impact study; and two in federal courts, one forcing the federal government to suspend payments and the other canceling the project entirely.

Draft all these people into the Brazilian army — the current commander in chief is an army engineer — hire the landless peasants into a program like Roosevelt’s CCC, and then tour around the countryside like a latter-day Coluna Prestes, building the stuff that needs to get built.

It may sound Stalinist to you, but, hey, look, my grandfather — Lt. Col. Brayton (USA-Ret.), Univ. of Missouri Class of ‘32 — used to say that the CCC is exactly why you had the U.S. emerging from the Great Depression without social chaos — and with a few nice highways and dams and things into the bargain. (And some New Dealer machine-politics problems to clean up as well, I am not gilding the lily here).