Latin America: The Other Odebrecht Payments

Leaked records reveal more than $39 million in secret Odebrecht payments made in connection with the Dominican Republic’s giant Punta Catalina coal-fired power plant, above. (Photo: CDEEE)


Leak exposes millions in new payments in Odebrecht cash-for-contracts scandal.

BY LATINVEX STAFF

A new report by the International Consortium of Investigative Journalists (ICIJ) reveals several payments for contracts by Brazilian construction and engineering firm Odebrecht that were previously unknown and involved prominent figures and massive public works projects not mentioned in the criminal cases or other official inquiries to date.

These discoveries were made in a fresh trove of leaked records from an Odebrecht division created primarily to manage the company’s bribes. The records were obtained by the Ecuadorian news organization La Posta and shared with ICIJ and 17 media partners across the Americas. The leaked records reveal hidden payments across the region that extend far beyond what has been publicly reported, including:

• More than $39 million in secret Odebrecht payments made in connection with the Dominican Republic’s giant Punta Catalina coal-fired power plant. Two official investigations into the project that reported finding no wrongdoing didn’t mention these payments.

• Seventeen payments totaling more than $3 million related to a Peruvian gas pipeline. Among those slated to receive payment was a company owned by a Peruvian politician who, in an unrelated recording recently aired by a local news station, appeared to plot the assassination of a rival.

• Emails discussing secret payments that a bank owned by Odebrecht operatives made to shell companies related to the construction of a $2 billion subway system for Ecuador’s capital, Quito. The documents don’t say who received the money.

• Payments related to more than a dozen other infrastructure projects in countries around the region, including more than $18 million linked to the subway system in Panama City and more than $34 million connected to Line 5 of the subway system in Caracas, Venezuela.

The files obtained by La Posta and ICIJ contain more than 13,000 documents that had been stored by the Odebrecht division on a secret communications platform known as Drousys. These files were obtained separately by the Ecuadorian news outlet Mil Hojas, which then joined in the project.

“The leaked files make clear that Odebrecht’s web of corruption extended to many public works projects and public figures that have not been addressed by law enforcement, raising questions about whether Odebrecht has been fully candid with authorities and about the political will of some prosecutors to pursue cases,” ICIJ’s report says.

However, not all payments by the division were bribes, Odebrecht has said.

“Various works by the company are registered in these systems,” Odebrecht’s Peruvian division said in a July 2018 statement, in reference to Drousys and another off-the-books platform used by the Structured Operations unit. “This does not mean that all of them involved corruption or bribes.”

INSIDE THE BRIBERY DIVISION

Odebrecht’s Division of Structured Operations combined the stealth of a criminal conspiracy with the bureaucracy of big business and documents include frank and explicit discussions about how to ensure the secrecy of the system, the ICIJ says.

“One email string is a discussion of the need to break multimillion-dollar payments into smaller increments to avoid making banks suspicious,” the report says.

There also are spreadsheets that track the bribery division’s payments, with one listing more than 600 outlays totaling more than $230 million issued from late 2013 through 2014.

Among the projects that the unit’s secret payments helped steer to Odebrecht, criminal investigations would reveal, were the rapid-transit system in Lima, Peru; a dam in Michoacán state, Mexico; and a hydroelectric power project in Ecuador.

“But, it turns out, the sweeping deal with Brazil, U.S., and Switzerland had some significant limits,” the ICIJ says. “Odebrecht, in fact, was not made to tell all. Its detailed statement of facts, for instance, discloses how much the company had paid overall in bribes across the region, but it doesn’t specify which projects were the subject of the payoffs or who had received them.”

THE DOMINICAN REPUBLIC

In late 2013, when the Dominican Republic’s state utility company was awarding a contract to build the Punta Catalina coal-fired power plant, a 770-megawatt facility on the Caribbean coast, it tapped the Economy and Development Foundation, an economic consultancy based in the Dominican capital of Santo Domingo and headed by prominent economist Andrés Dauhajre, along with two others, to evaluate the bidders’ financial proposals.

“By then, the state utility had disqualified several bidders, citing poor technical proposals, and the only remaining candidate for the job was a consortium led by Odebrecht,” ICIJ says.

To win the contract, Odebrecht still needed to have its economic offer and financing plan approved. Dauhajre and the other consultants approved its plan, and Odebrecht was awarded a contract of more than $2 billion, hundreds of millions of dollars more than some of the bids by its sidelined competitors.

When the Odebrecht scandal exploded across Latin America, the company admitted to prosecutors in December 2016 that its corrupt payments included $92 million in bribes in the Dominican Republic.

“The Punta Catalina project immediately fell under suspicion,” ICIJ points out.

A commission led by an influential clergyman, Monsignor Agripino Núñez Collado, was appointed to investigate the contract and it found no proof of irregularities in the plant’s bidding or financing, handing a major victory to Odebrecht. The Dominican attorney general came to a similar conclusion upon announcing charges against 7 defendants in the Odebrecht case in June 2018, saying his team had thoroughly investigated Punta Catalina and found no evidence of corruption.

“The ledgers of Odebrecht’s Structured Operations unit show dozens of payments that appear to have eluded investigators, who did not have access to the records obtained by ICIJ,” the report says.

A spreadsheet tracking the unit’s hidden payments from December 2013 through December 2014 reveals 62 payments totaling more than $39 million related to a “Planta Termo,” or “Thermoelectric Plant.” Five of the payments, worth more than $3.3 million, were directed to a company listed at a Dominican address called Baker Street Financial Inc.

The spreadsheet indicates that at least two of the payments to Baker Street passed through a Bahamas-based company, Fincastle Enterprises Ltd., which has been cited by prosecutors in Peru as a vehicle for Odebrecht’s bribes. These payments were made in May and July 2014, several months after Odebrecht’s financial plan was approved.

On Dec. 7, 2015, Baker Street Financial paid more than $2 million for a 12th-floor apartment in a sleek glass-clad building in a posh midtown Manhattan neighborhood, around the block from Le Bernardin, the acclaimed French restaurant.

New York City records of the sale include a deed signed by Baker Street Financial’s sole director: Andrés Dauhajre.

Dauhajre told ICIJ that the payments he received from Odebrecht were for consulting services that he provided in connection to the financing of the power plant. Dauhajre said Odebrecht retained his services in early 2014 after one of the key funders expected to underwrite the project, the Export–Import Bank of the United States, pulled out due to a directive by then-U.S. President Obama not to finance coal-fired power plants due to their contributions to climate change.

Dauhajre said he helped Odebrecht find alternative sources of funding for the plant, and that Odebrecht had proposed Fincastle Enterprises as the vehicle for his payment.

“Baker Street Financial successfully and effectively provided the advisory service requested by Odebrecht during 2014 and 2015,” Dauhajre said in a letter to ICIJ. “It was this financial service that generated the remuneration.”

ECUADOR AND PERU

A subway system for Quito — the high-altitude capital city that is home to more than 1.5 million people — was Odebrecht’s most important project in Ecuador. The project’s construction budget came in at just over $2 billion.  The 14-mile system, slated to open in December, is expected eventually to transport as many as 530,000 commuters a day.

When Odebrecht’s international bribery was exposed, local prosecutors launched an investigation into whether the company’s work on the Quito Metro had been tainted by bribes. In March 2018, after more than a year on the case, prosecutors closed the investigation, saying there wasn’t evidence to support charges.

“The files of the bribery division might reopen it,” the ICIJ says.

In Drousys system emails, Odebrecht employees, code-named “Silver,” “Fred” and “Wilson,” discuss payments for the Quito Metro that were routed through their department. In July 2015, for instance, Silver asks Fred whether payment for the Metro had been issued and if it had been made via Meinl Bank, a bank whose Antigua branch was acquired by Odebrecht operatives in 2010 to facilitate corrupt payments, according to prosecutors. Fred replied in the affirmative.

“The Metro payment was also made through Meinl,” Fred wrote in an email to Silver.

The message notes that the payment was made through the company Fortress Investors Ltd., which appears repeatedly in the bribery division’s files as a conduit for payments. The records don’t say who received the secret payments or their purpose.

Mauricio Rodas, the former mayor of Quito whose administration approved Odebrecht’s contract, told an ICIJ journalist that Odebrecht was chosen solely because it offered the least expensive economic proposal, and that the project would reshape transportation in Quito.

The leaked Drousys files include other secret payments related to projects that so far have not been connected to the Odebrecht scandal. The Gasoducto Sur, a gas pipeline in southern Peru and the most prominent project of the administration of former Peruvian President Ollanta Humala, is mentioned in connection with 17 payments in 2014 totaling more than $3 million.

A Peruvian prosecutor indicted Humala and his wife, Nadine Heredia, in May for allegedly laundering assets provided by Odebrecht. Payments related to the $7 billion pipeline have not been disclosed by Odebrecht.

The Ruta Viva, a highway between Quito and Ecuador’s largest airport, is not mentioned in  Ecuadorian prosecutors’ filings but is named in the new trove of documents in connection with a payment of 915,000 in an unspecified currency made in October 2012, several months after the city awarded Odebrecht the contract to build the road. The leaked documents don’t say who received the hidden payment.

In Panama, the country’s first ever rapid-transit system, in Panama City, and an expansion of the city’s airport, Tocumen International, are linked for the first time to millions of dollars in hidden payments made in 2014.

In Venezuela, new details emerged showing more than $34 million in secret payments in 2014 linked to Line 5 of the Caracas Metro, for which only one of 10 planned stations has been built, according to the new report from the International Consortium of Investigative Journalists.