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Brazil's top court clears way for Petrobras inquiry in Congress

Source: Reuters - Thu, 24 Apr 2014 04:26 GMT
Author: Reuters
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People walk past Brazilian Oil company Petrobras's headquarters in Rio de Janeiro April 11, 2014 REUTERS/Ricardo Moraes
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BRASILIA, April 24 (Reuters) - Brazil's Supreme Court upheld late on Wednesday an opposition request for a congressional inquiry into alleged corruption at state-run oil company Petroleo Brasileiro SA, a ruling that could upset President Dilma Rousseff's re-election plans.

The investigation into the country's biggest company, known as Petrobras, will scrutinize its controversial purchase of a refinery in Texas at a time when Rousseff chaired the board of the oil giant.

Congress will also look into allegations that Petrobras officials took bribes from SBM Offshore, a Dutch supplier of offshore oil vessels, and a money laundering scam that has led to the arrest of a former Petrobras director.

These cases are already being probed by regulatory agencies and federal police, but a Congressional inquiry will add fuel to a growing political scandal surrounding the oil company, which can only help Rousseff's opponents in an election year.

Rousseff is already under attack for the financial decline of Petrobras on her watch. Once seen as the star at the center of Brazil's rise to become a major oil exporter, Petrobras is today the world's most indebted oil company and lost half of its market value in Rousseff's three years in office.

Any revelations of corruption at Petrobras would damage Rousseff's reputation as a competent manager with zero tolerance for unethical behavior in her administration, undermining approval ratings that are already slipping in opinion polls.

At present, Rousseff is still favored to win a second term in the October 5 elections, but political scandal would force a much tighter race with an uncertain outcome.

Rousseff's supporters in Congress sought to dilute the inquiry by requesting a wider investigation that would also look into alleged corruption in states governed by her opponents, resulting in a dispute that went to the Supreme Court, which upheld the original inquiry.

PASADENA REFINERY

The main thrust of the investigation will focus on claims that Petrobras overpaid for a refinery it bought near Houston in 2006 when Rousseff was chairman under her predecessor and mentor, former president Luiz Inácio Lula da Silva.

Petrobras bought 50 percent of the 100,000-barrel-per-day (bpd) refinery for $360 million from Belgium's Astra Oil, planning to maximize returns on Brazilian heavy oil shipped to the United States.

Rousseff has said she was not informed of two clauses in the contract to buy the Pasadena Refining System Inc refinery that made it an onerous deal for Petrobras: a Marlin clause that compensated Astra for possible losses, and a put option that in 2012 forced Petrobras to buy the remaining stake as part of a $820.5 million legal settlement.

Petrobras chief executive Maria das Graças Foster, testifying before a Senate hearing last week, said it was a bad deal in retrospect but looked good at the time, before a global economic downturn made it into a money loser.

The Petrobras CEO at the time of the deal, José Sergio Gabrielli, told the Estado de S. Paulo newspaper last week that both he and Rousseff were responsible for the purchase, and she should shoulder her part of the blame.

"I still think it was a good deal in 2006, a bad deal for the market conditions in 2008-2011 and it became a good business once again in 2013-2014," Gabrielli said, referring to the refinery operation that turned its first profit for Petrobras in the first two months of this year.

On Wednesday, opposition congressmen called on Gabrielli to clarify the refinery purchase before three committees.

Adding to the Petrobras scandal, a former head of the company's refining and supply unit, Paulo Roberto Costa, was arrested on March 20 in a money-laundering probe.

Two weeks ago, police raided the company's headquarters in Rio de Janeiro and seized documents in "Operation Car Wash." (Reporting by Anthony Boadle; Editing by Michael Perry)

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