Wednesday, March 23, 2016

The lifestyle of a rich and famous populist: Lula’s case study.


Under this heading, two men are top stories these days, The Donald (Trump) in the USA and Lula (also known as Luis Inácio Lula da Silva) in Brazil. They share some personal attributes, both are rabble rousers and enjoy a tacky lifestyle. The first one is a right wing populist who lives off his personal fortune while the second is a left wing former president who lives off his rich friends’ kindness.

Next year, the USA may swear in its first populist president; on the other hand, Latin America has perfected the formula. In 2016, the majority of its leaders are dye in-the-wool leftwing populists. Among them, Lula who was president for eight years has reached mythical status, primus inter pares. Like his clone, the late president Chávez of Venezuela, Lula is a very divisive figure: he is the most loved and the most hated man in Brazil. Now, he is certainly first among equals in matters of political trickeries and obstruction of justice. Although an early admirer, this blogger is no longer a total fan. His fall from grace was faster than his spectacular rise in national politics.

In 2016, Lula stands accused of money laundering in the context of the Petrobras mega- embezzlement scandal investigated by operation Car Wash, influence peddling with construction companies, illicit self-enrichment, concealing property ownership and possibly obstruction of justice. His wealth is estimated at US$ 8 million, and one of his sons is amongst the richest man of Brazil. To add insult to injury, the current president Dilma Rousseff named him Chief-of-staff, a job which shields him from possible prosecution.


                                                      Lula before

Lula comes from an under-privileged background from the poverty-stricken North East of Brazil. He worked as a metal worker in São Paulo, and has been a political fixture since the 1970s when as a trade unionist, he stood up to the military regime. After two attempts, he was finally elected president in 2003, and left the office after two terms at the end of 2010. As president, he put aside his left-wing rhetoric. Benefitting from the commodity boom, Lula led Brazil through years of mega investments. He was a successful president albeit a lucky one. He used the windfall to pull millions of people out of poverty through steady economic growth and money transfers to the most marginalized ones in his native Northeast. However, he failed to reform Brazil’s outdated institutions which would have allowed the country to weather leaner years like now.

When Lula left the presidency, he was legitimately a man with a high middle class standard of living; he had substantial savings and enjoyed many generous retirement pensions. When in office, a president hardly spends anything; Lula had no lawyers to pay like Bill Clinton, another rags-to-rich president, nor gave 90 percent of his salary to charity like José Mujica, the former president of Uruguay who qualifies as the world’s “humblest” of president.

However upon leaving Brasilia, Lula told his adoring supporters that “I am leaving government to live life on the streets where I always was, I will be more of the people than ever before”. Instead of enjoying his new status of a respected self-made man, Lula was longing for his previous life of hardship. He wanted people to believe that in spite of eight years in the presidential palace and a successful career, he had not changed and remained true to his poor man’s values. He even bragged that he had never opened a book in his life. On the other hand, the millions of people who had benefitted from the economic growth where unabashedly busy improving their lots and sending their kids to better schools. For this blogger, through the above statement, Lula planted the seeds of trouble to come.

Emulating many of his peers, the former president started a lucrative career of international lecturer. Charging speaking fees in the order of US$ 100,000.00, Lula delivered hundreds of lectures, mostly in Latin America and Africa. Nothing illegal at this stage. However, these lectures were overwhelmingly paid by business corporations, and many are implicated in the Car Wash Operation. Construction companies not only funded Lula’s conference trips and lectures but also made hefty donation to his foundation in São Paulo (Instituto Lula). Interestingly, the Lula Institute does not post these lectures on line; recently a famous judge wondered whether they actually existed. For a period, Lula was under contract with the New York Times to write opinion columns. During his international trips, Lula has been portrayed as a lobbyist or middle man for Brazilian construction firms. According to the Brazilian media, in 2015 these companies had about US$ 5 billion worth of contracts with the Federal Government. Lula’s close ties with these firms have tarnished his former statesman aura.

                             lula after

                                                        Lula now

With so much money coming his way, Lula faced an existential dilemma. True to his word as a poor man, he could not exhibit a flashy lifestyle. Even the Car Wash sleuths have a hard time following Lula’s money trail; they nonetheless claim that there is evidence that the former president received real estate and money gifts from firms implicated in Petrobras bribery scheme. Lula is linked to a beach front three-story penthouse and to a sprawling country estate with swimming pool and lake. The police believes they were given to him in a “scratch-my-back” type of scheme because Lula’s personal items were found in these places.


                                 Country estate in a shitty location..

The ex-president claims that he owns nothing, and that, he and his family only visited these residences as guests. One knows that Lula lives with his wife in his former apartment in suburban São Paulo, where he owes three apartments. The apartment next to his is empty and someone pays the rent, but who? Facts remain fuzzy regarding Lula’s investments.


                                        Lula: A poor man’s soul.

By Brazilian standards, these are far from being prime location real estates. It is hilarious to hear a released taped phone call whereby the mayor of Rio de Janeiro, an otherwise devoted fan of Lula tells him that “his farm house and penthouse are in shitty places, that Lula’s has never lost his poor man’s soul, and that it is the biggest fucking disgrace”. Lula seems to agree.


                                       Lula and Dilma: Team Work.

Lula’s chief of staff nomination has been suspended by a Supreme Court judge. It is ironical to remember that in 1988, Lula allegedly said that when a poor man steals he goes to jail; but when a rich guy does the same, he get a ministerial job! At this stage of the game, the political crisis has reached such an unparalleled level of pandemonium and crassness that apparently the writers of the political series House of Cards are keenly following the plot’s twists and turns.

Sunday, March 6, 2016

Brazilian Bribery Scandals for Dummies

A Swedish politician inadvertently uses her official credit card to have a haircut; she ruins her political career. A British lord spends his stipends on landscaping his garden or on prostitutes; national opprobrium forces him into exile in some backwater estate. A French minister lies about an insignificant secret Swiss bank account (€ 600,000); he is sacked and put on trial.

Conversely, when the Brazilian speaker of the Senate flew 2000 kilometers for free on an air force jet to have 10,000 hairs implanted he receives accolades from his peers. However, lambasted by the media, he grudgingly agreed to refund the state. Embroiled in another scandal, the serial offender was forced to step down. He has nonetheless been reelected speaker of the Senate. The speaker of the lower house of Congress one-ups him. He is accused of money laundering and of hoarding US$ 5 million of bribe money in several Swiss bank accounts. Undeterred, he made clear that he will not leave his post even if indicted. Bribe-taking seems to be in the majority of Brazilian politicians’ DNA. A former president, disgraced and impeached in the early 1990s, is now accused of taking a $ 1million bribe in the Petrolão, or Big Oil embezzlement scandal. And there is the case of Congressman Paulo Maluf, the poster boy for Brazil’s dysfunctional and flawed justice system. In the 1990s, when he was the mayor of São Paulo, he embezzled $ 300 million. He is an Interpol fugitive and France has in abstentia sentenced him to a three-year jail term for organized money laundering. Two years ago, he was reelected to Congress, thanks to his efficient vote buying structure.

The federal police enquiry, Operção Lava-Jato (Operation Car Wash) started innocuously enough about two and half years ago when it began investigating a money laundering scheme running in a chain of petrol stations. Now it had grown exponentially into a zillion dollar embezzlement scandal, and Brazil’s largest bribery and kickback scandal so far. The Petrolão corruption scheme is shaking the foundations of the state and that of Petrobras, the state-owned and publically-listed oil giant. Petrolão incriminates government officials, political parties and political leaders of the government coalition, large construction corporations, and middle men. The prosecutors are boldly casting a large net, implicating an increasing number of people, and uncovering additional but connected corruption cases.

Operation Car Wash with its cynical intrigue, star-powered cast and twist and turn plot is more exciting than even the most entertaining Brazilian telenovela, the celebrated soap operas. State-owned enterprises, particularly in the oil industry, are long-established government’s cash cows and piggy banks. What makes this scandal so infuriating is the mammoth amount of money embezzled from golden goose Petrobras by officials who are expected to be its guardian angels. Petrobras is a national icon and the outrage has been enormous in a population usually portrayed as corruption-blasé. Petrobras’ new management is said to have written down $2 billion for corruption cost. In 2015, the already very much in debt Petrobras may have lost up to $ 7 billion as a result of poor management and oversight, corruption, waste, and low oil prices. To the dismay of its shareholders, the company posted a 60% loss of market value.

How was Petrobras bled? Large construction companies agreed to pay bribes to get their hands on Petrobras’ juicy contracts. The bribes inflated the price of these million and billion dollar contracts by an estimated 3 percent. Moreover, to ensure that projects and bribes were evenly apportioned, contractors formed cartels between them. In the process, Petrobras was twice duped. Bribes are an inherent component of government’s infrastructure projects. In Petrolão, sleaze has a political dimension as most of the siphoned money ended up in the pockets of the government party and that of its coalition partners. The scheme was well lubricated thanks to the resourcefulness of the middle men who on behalf of Petrobras executives and their political benefactors, moved the money offshore to shell companies. The money then resurfaced into political campaign slush funds. Most of the money was disbursed during the 2014 campaign, and the left-over went towards funding the lavish lifestyle of political hacks.

The leftish Worker Party, whose acronym is PT in Portuguese, is the governing party. It was founded by the former president Lula da Silva (aka Lula) and the current president, Dilma Rousseff (aka Dilma) was handpicked by Lula. When Lula became president in 2003, the spoil system went into over-drive: the majority of executive and procurement positions in state-owned enterprises were gradually filled by party and government supporters. As technocrats were replaced by “yes” men, corruption intensified. It has now become endemic affecting all economic sectors. Under Lula’s presidency, nationalist fervor went as far as enacting a tough new national content legislation. Petrobras and other oil companies were required to purchase often shoddy and always overpriced Brazilian supplies and technology and use locally built shipyards. Worldwide, national content rules are regarded as conduit for corruption, and not surprisingly Brazil has finessed the scheme.

lula                   dilma

                                      Partners in Sleaze?                                           

Operation Car Wash is bringing both surprises and dismay; its appendages are now reaching beyond Petrobras into, among others, the energy, banking, and agricultural sectors. The prosecutors have handed down many convictions, and leading political figures of the governing majority have been implicated but not yet charged (so far they are about fifty). They have reacted with indignation denying wrong doing. Until now, about two dozen individuals have been jailed. They include Petrobras executives and construction sector tycoons who have been perp walked to the delight of the public and the media. Brazilian jail facilities have convinced many to cooperate with the police to seek leniency through plea bargains. They are singing like Zé Carioca the street wise, dapper parrot of Disney cartoons, to expose politicians whose jail terms are eagerly awaited by the Brazilian people. Only the Federal Supreme Court (FSC) can issue arrest warrants to elected officials, so it is a slow, frustrating and tortuous process.

Actually, the FSC regards obstruction of justice with harshness and recently sent a ruling party senator and senate whip to jail along with a famous investment banker. This episode, related to Petrolão, took a page from the script of a bad telenovela. The pair was trying to bribe and spirit out of the country a key witness whose plea bargain could have implicated them. Both denied wrongdoing and have now been released. The senator was freed after agreeing to a plea bargain. However, the pair is not yet out of the woods.

zecarioca          delcidio

                    Ze Carioca and imitator: who sings loudest?

Operation Car Wash may be the Federal police’s “piece of resistance”, but the cops are busy investigating other scandals, less hyped but just as damaging for the government. Operation Zelote stands out for the creativity of the probed corruption scheme. Members of a division of the tax department responsible for settling tax disputes with corporations were actually helping them to avoid taxes. The companies agreed to reward the corrupt bureaucrats with up to 10 percent of the money they saved through this arrangement. Interestingly, many of these companies are also implicated in the Petrobras case. It is estimated that over the last ten years the government lost a whopping $ 5.8 billion in tax revenue.

The Petrobras investigation has been going on for over two years; it is an increasingly complex and convoluted case and people tend to lose interest. However, Car Wash fatigue has not set in because every other week, the humdrum of the investigation is shaken by bombshell disclosures. The latest one is the arrest of Dilma’s campaign guru who allegedly overcharged Petrobras for work and distributed the excess money as kickbacks. Brazilian multinational Odebretch, the biggest construction company in Latin America, is in the spotlight for being involved in every scam. It has been identified by prosecutors as the money launderer-in-chief, giving bribes for business favors. Its cozy relationship with Lula is being scrutinized. The former president is now being investigated for influence-peddling on behalf of Odebrecht as well as bribe taking. The firm’s setbacks are not limited to Brazil. It is under investigation in Peru, Switzerland and in a couple of oil-producing African countries.

Petrobras is slowly returning to good health. People are eagerly waiting with for more arrests, hopefully closer to the center of power. The scandal is regarded a game-changer in Brazil, a country traditionally too complacent with grafts, swindlers and sleazy politicians. The economic downturn makes people less tolerant. Operation Car Wash may be a first step towards cleaning the Augean stables run by the scandal-ridden political elite, a self-entitled caste which until the Car Wash enquiry was a nexus of impunity beyond the reach of justice.

To the dismay of many politicians, and in spite of the spread of the zica virus, Operation Car Wash is still front page news. Nonetheless, politicians of all stripes rejoiced at a recent poll which indicated that Aedes aegypti, the multi-task mosquito, is Brazil’s enemy number one. Aedes aegypti would not have established its operation headquarters in Brazil if the country’s institutions had not been plundered by these criminal officials.