PARTICIPANTSʼ PAPERS
OPERATION CARWASH AND THE FIGHT AGAINST CORRUPTION
Frederico Skora Lieberenz＊

I. OPERATION CARWASH
Operation Carwash, as several actions against corruption in Brazil and abroad have become known since
March 2014, all started with the arrest of a former senior director of the national oil company for his
involvement with a group of money launderers. It has been going strong for three-and-a-half years at the time
this paper was being written, and even though it is showing signs of slowing down, it is safe to assume that it
was a major step forward in the fight against corruption in Brazil and the recovery of the proceedings fromthose crimes.
A. Early Developments
Before the success of Operation Carwash, several other operations that investigated rampant corruption
in the country had failed to stand in the superior courts. It was a known fact in Brazil that crime paid off if
you were a politician or a high government official, and that the chances of conviction were minimum. This
scenario started to change in 2005.
1. The Scandal of the Mensalão
In the year 2005, a Brazilian politician took the stand in Congress to report on what came to be known as
the Mensalão: legislators were being paid a monthly amount by their parties to vote according to theinterests of the government. The money came through fraudulent contracts with marketing companies andwas suspected to have paid off more than half of the Congress. After these revelations, the second mostpowerful politician in the Labourerʼs Party of Brazil, which ruled the country, was removed from office, neverto regain his former status. Several other politicians floundered but managed to come once more into office inthe next legislature. In the end it amounted to a political earthquake, but economic gains and an increase inpopular programmes managed to keep the government of the Labourerʼs Party of Brazil in power despite theheavy toll on its public image.
2. The Popular Revolts of 2013
In 2013, there were several popular uprisings in the country, the most famous of which began in Rio deJaneiro after an unpopular increase in the prices of public transportation. What at first was a movement ofstudents suddenly started to congregate several groups, which were out to demonstrate their disapproval of
the current government of both the state and the city of Rio de Janeiro. The movement culminated with the“walk of the two hundred thousand”, one of the largest public demonstrations in Brazilian history, which took
place in one of Rio de Janeiroʼs largest avenues downtown. Legislators, terrified of the public uprisings, among
other measures approved several pieces of anti-corruption legislation, which had been put away in their officedesks for more than a decade.
3. The Supreme Court Judgement on the Mensalão Scandal
It was not until 2013 that the Mensalão Scandal was finally mature for trial by the Supreme Court ofBrazil. Since several office holders such as deputies, senators and ministers were involved in the corruption
and money laundering schemes, the constitution demanded that the case had to go to trial in the highest courtin the country, the Supremo Tribunal Federal.
The judgement exposed the Supreme Court judges and was entirely televised; public opinion was adefinite factor in the decision taking of the judges, as they would have to answer for their opinions in court.

＊

Federal Commissioner, Repression of Corruption and Abuse of Public Resource Division, Federal Police.

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The meticulous tracing of the money used to purchase votes in Congress and the adoption of the Theory of
the Domain of the Fact as derived from Claus Roxinʼs exposition on Mediate Authorship1 also led ultimately
to the conviction and incarceration of several high-office-holding individuals and entrepreneurs, somethingunheard of in the country thus far.
B. The Operation Begins
What began as an investigation on general money laundering schemes in Brasília, the countryʼs capitalcity, suddenly took a turn towards what came to be the greatest corruption scheme in the country.
1. Paulo Roberto Costa, Former Director of Oil and Gas of Petrobrás
Mr. Paulo Roberto Costa was early in his retirement after a successful term as Director of Oil and Gas ofPetrobrás, the countryʼs largest and most traded national public company. Such a position had put him inclose proximity with Brazilʼs most powerful politicians and businessmen, including the former President of
the Republic Mr. Luiz Inácio Lula da Silva and at-the-time current President of the Republic Mrs. Dilma
Rousseff.
Until one day, at the beginning of March 2014, Mr. Costa was on the passive end of a judicial search andseizure warrant for allegedly receiving a luxury automobile as a donation from Mr. Alberto Youssef, one of
the countryʼs most well-known money launderers. This discovery had been possible through the tracing of
one of Mr. Youssefʼs bank transactions, and the vehicle was ultimately found parked in front of Mr. Costaʼshouse. Investigators were intrigued as to the reason a former high-office-holding public servant would havefor receiving such a gift, and suspicions of corruption came to mind, but nothing could be proven at the time.
However, the fact that more than one million Reais (approximately five hundred thousand dollars at the time)in cash was found in a safe in his residence brought more questions that required answers.
The turning point in the investigation came quickly, when it was discovered that relatives of Mr. PauloRoberto Costa had been in one of his offices during the same morning of the search and seizure warrant at his
home and took several documents and possibly money to an unknown location. Rather than suffer his familyʼs
incarceration, Mr. Costa began negotiations with the Prosecutorʼs Office of Brazil for a “Colaboração
Premiada”, Brazilʼs form of plea bargaining. He finally delivered testimony that put several politicians andother high-ranking officials in prison, including his former colleague Mr. Renato Duque, Director ofEngineering of Petrobrás. From that point on, the scope of the operation escalated quickly, making full use ofits momentum.
2. Pedro Barusco, Former General Manager of Engineering of Petrobrás
As the investigations advanced, in March 2015, a former General Manager of Engineering of Petrobrás,rather than face imminent arrest, decided to come forward and offer the Prosecutors a deal. Mr. Pedro
Barusco proposed to repatriate more than one hundred and eighty million Reais he had stashed in a secretbank account in Switzerland and explain the whole scheme of corruption in Petrobrás if he could get
immunity from prosecution. The deal was considered and the Prosecutorʼs Office decided it was worth it.
Renato Duque was arrested a second time, after having been released once by the Supreme Court. It had
been discovered through spontaneous international cooperation with Switzerland and Monaco that he had
tried to take money from his bank accounts in the former countryʼs financial institutions to the latterʼs.
Differently from Paulo Roberto Costa, Renato Duque refused to cooperate with Brazilʼs authorities in theinvestigation for more than a year, before giving in and confessing his crimes in court in exchange for a
reduction of his sentence.
3. The Labourerʼs Party of Brazilʼs (PT) Involvement in Carwash
It was already suspected, but due to constitutional immunities regarding the prosecution of legislators andministers, it was a difficult case to take to court. It was easier for politicians to expel the accused from their
parties and revoke their mandates, but once the investigation came too close to the leaders of the parties,
including former President of the Republic Luiz Inácio Lula da Silva, it was decided that a change in strategy
was necessary.

1

Also known as the Control Over the Organization Theory.

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In fact, the second arrest of Renato Duque, the director that had been appointed by the Labourerʼs Party,
and veiled threats by his family that he would cooperate if he was not released, made it only a matter of time
before the partyʼs connection was put to light. Financial operators of other parties, including the mostpowerful, the Democratic Movement Party of Brazil (PMDB), had also been incarcerated and could decide tocome clean to the authorities at any moment. The investigatorsʼ experience in other money laundering cases
made them experts in following the money, and international cooperation, especially with Switzerland and theUnited States, had borne fruit. The situation was desperate for the survival of the parties.
It was at this already delicate time that several contractors with the government became targets of theinvestigators. Several publicly traded companies, multinationals of the oil and gas and construction businesses
suffered search and seize judicial others. It had been discovered that all those companies involved had somekind of department for handling the payment of bribes to politicians and other public officials. Brazilʼs largest
construction firm, Odebrecht, with business all over the country and the world, after a long incarceration of
its president, finally decided to collaborate with the prosecutors and revealed their “Department ofStructured Operations”, or the bribe payment and accounting department, which ran parallel to thecorporationʼs regular operations. Their computer servers were encrypted and housed in a computer farm in
Switzerland. Once the proper key was inserted, it revealed a world of bribes.
Testimony by Odebrecht and other companiesʼ highest officials revealed what had long been suspected in
Brazil: that the very structure of democracy in the country had been tainted by corruption since time
immemorial. The president at the time, Mrs. Dilma Rousseff from the Labourerʼs Party, was impeached fromoffice following constitutional dictates. The vice-president, Michel Temer, was seriously assailed afterwards,
but has managed to hold on to his office despite public opinion at the time of the writing of this paper.

II. MEASURES FOR TRACING PROCEEDS OF CORRUPTION
Several instruments for tracing the proceeds of corruption are available for use in Brazil, and all of them
have been used in Operation Carwash.
A. SARs (Suspicious Activity Reports)
Known as RIFs (Relatórios de Inteligência Financeira), reports from Brazilʼs Financial Intelligence Unit
(Conselho de Controle da Atividade Financeira, or COAF) are some of the best means of tracing the proceedsof corruption. Financial institutions in the country are required to report any suspicious activities to COAF or
run the risk of facing severe fines and other penalties according to the Anti-Money Laundering Statute. SARs
can be used as evidence; however, this is not encouraged by the FIU as it exposes investigative techniques.
Additional information can be retrieved by the Group of Egmont, a network of FIUs from all over the world.
B. Lifting of Bank, Tax and Phone Record Secrecy
Judges and prosecutors, to a lesser extent, can lift the secrecy of bank and tax statements and telephonerecords. Specialized computer software and investigators can then help trace the relations between certaintransactions and individuals and expose corruption and/or money laundering schemes.
C. Organized Crime Legislation
Laws against Organized Crime in Brazil, especially the Act of 2013, have made it clearer to judicial
authorities that Plea Bargaining and Controlled Delivery can and should be used to trace the proceedings ofcorruption. Means of finding evidence, such as the Colaboração Premiada (plea bargaining), are essential as
they paint a much clearer picture than investigators can usually reveal using only the other means available
and are often the only means to go into the deepest depths of the companiesʼ and partiesʼ money laundering
operations. Controlled delivery can be used to trace the route used by money launderers to escape theauthoritiesʼ watch and find the final recipients, those that are usually too far from the corruption act itself tobe convicted otherwise.
D. Task Forces
Special judges, prosecutors and investigators have been designated by their own organizations to work instrict cooperation and in special cases. Without this joining of efforts it would not have been possible forinvestigations, prosecutions and convictions to happen in such short times; usually a corruption case in
Operation Carwash is investigated, indicted and presented to an individual judge and tried in under a year.
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Meanwhile, most of the indicted have been incarcerated for the time being due to the potential to escape andto interfere with the investigation. Cases are made strong, carried by specialized authorities and rarely sufferfrom nullities. Tracing and seizing of assets are done in the proper moments so it is made harder for criminals
to move the proceedings from their crimes before they are taken from them. Investigations also run insecrecy until the serving of the search and seizure and arrest warrants.
E. Central Bank of Brazil
The Central Bank of Brazil keeps a record of all the financial institutions and their account holders in
Brazil. This means that investigators, prosecutors and judges may at any time request information on theaccount holders. This is usually restricted to their names and social security numbers (CPFs), but from that
small piece of information, an investigator could build up a case and request a court order to lift the banksecrecy and get the statements. The Central bank also demands that information passed by the financial
institutions come in an orderly, predetermined fashion, so it can be easily run through computer software thatanalyses and cross references the information as to make it useful for the investigations.
F. Direct International Cooperation
Several treaties have already been signed by Brazil in the areas of Money Laundering, Corruption and theTracing and Freezing of the proceedings from those crimes. This allows for spontaneous assistance bycountries often targeted by money launderers such as Switzerland, Luxembourg and Monaco as well as
direct cooperation through national central units. In Brazil the Departamento de Recuperação de Ativos e
Cooperação Internacional receives both domestic and international requests for cooperation and distributes
them accordingly. Statutes demand that the requests follow international guidelines and the nationʼsfundamental principles regarding human rights.
G. INTERPOLAs a part of INTERPOL, Brazil has an international network of police organizations at its disposal andmay use it to find and arrest criminals abroad, request intelligence on individuals and companies, try to findworks of art that might have been used to launder money, etc. Since corruption and money laundering isalready an international crisis, police cooperation through INTERPOL has been growing in scope and is an
integral part of Brazilʼs Federal Police structure.
H. Rogatory Letters
Once a judicial decision has been made final, it is not a matter of direct cooperation anymore. Brazilian
court sentences that must be served abroad and international sentences that must be served in Brazil have togo through the countryʼs highest courts. The long time it usually takes for a court decision to become final in
Brazil, however, causes Rogatory Letters to become limited in their use against corruption and money
laundering, which require quick action if they are to be effective against organized crime.

III. PROBLEMS WITH OPERATION CARWASH AND ITS FUTURE
The many investigations that have taken place since March 2014 have run into several difficulties in the
judicial, political and social levels in Brazil.
A. Court Privilege
Several authorities in Brazil, not only presidents but also all ministers, presidents and governors, somesecretaries, legislators, judges, prosecutors, among other authorities, all have court privileges: they must be
tried by a superior court, which are generally ill suited for investigations. Usually cases tried in the first
instance in superior courts go nowhere and get tangled in politics and bureaucracy. Superior courts excel inappeals but are not investigative courts. This causes office holders and other high officials to escapeconvictions that expire through the statute of limitations, and they often get to keep their ill-gotten gains.
B. Difficulties in the Suspension or Revoking of a Term of Office
Only legislators can suspend or revoke the Terms of Office of their peers. This causes deputies andsenators with little in-house support to be ousted quickly, to appease public opinion, but those with a lot of
support, such as party leaders, are usually protected from such measures, no matter the crime or how clearly
it was exposed.

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C. Social Partisanship
As Operation Carwash started, the country was under the rule of the Labourerʼs Party. President Dilma
Rousseff, while she counted with the support of the extremely popular former president, Luiz Inácio Lula daSilva, did not have much charisma or support from the parties. The Labourerʼs Party also suffered fromprejudice, being the countryʼs only party of the masses, dedicated to the proletarian causes. Once President
Dilma lost the support of Congress, it was a matter of time before the Labourerʼs Party was removed fromoffice and the Democratic Movement Party of the vice-president Michel Temer was instated to resume themandate. This has caused much belligerence between supporters of PT and those who were against it, and so
the whole discussion on corruption became secondary.
In practical terms, investigations in the superior courts ran much more quickly and had more support
when PT was being targeted more often. Now there is a general feeling in the country that investigations go
slower and that the government is removing investigators, prosecutors and judges from Operation Carwash.

IV. CONCLUSION
There is a major election next year, and society is very polarized. Former President Mr. Luiz Inácio Lulada Silva has announced he shall be running for office once more, and there is a chance he can lose his politicalrights before the elections. Meanwhile candidates from the extreme right movements, which had never been
seriously considered for the highest office in the country, suddenly seem to be the only alternative to Mr. Lulafor some.
There is also a serious discussion as to whether the current political scheme should be kept or changed toanother configuration, and as to whether companies should be allowed to pay for office runnersʼ campaigns ornot. The focus is on the next elections and the means to balance public opinion and the legislatorsʼ survival
instincts.
Meanwhile, efforts to stop corruption and to seize the proceedings of the crimes continue in Brazil andabroad, but legislators are not keen to give up their court privileges and thus allow the cases against them tobe handled by singular, experienced judges. Only public pressure and serious discussions of the ways to leavethis standstill can move the authorities to go against their own wishes and respect those of the general
populace.

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