petrobras-brasilLast week Brazil’s Supreme Court ruled unanimously that Dilma Rousseff’s governing Workers Party manipulated its books in 2014 to hide massive fraudulent activity through the semistate oil giant Petrobras SA to the tune of more than twenty billion euro.

It marks Brazil’s biggest ever corruption scandal, and it is the first time in 80 years that such a ruling has been made. The story of the fraud allegations reads like a mafia movie; yachts, Rolex watches, $3,000 bottles of champagne and prostitution rings all feature. Astonishing sums of money exchanged hands through networks of phantom corporations and slabs of cash were transported around the world through a system of couriers. Petrobras SA officials are accused of colluding with a cartel of contractors to overcharge the oil company construction and service work. The cartel decided who would win any contracts tendered; this scheme included some of Brazil’s largest construction companies. The excess payment was then divided between Petrobras staff, political figures and the cartel. Meanwhile, Petrobras publicly traded as 51% government owned.

While this type of government corruption is not unique, the scale of payments involved is certainly noteworthy – one ex-Petrobras employee has allegedly promised to pay back the R$100,000,000 he gained through the fraud racket. Accusations of campaign funding fraud have been included in the charges, and will be politically troubling as Rousseff’s party will campaign for re-election this year; after an election in Brazil parties must submit their accounts to the authorities. Last week presiding Judge Mendes said that there had also been indications of improper financing since the investigation begun. To date, Swiss authorities have frozen half a billion euro in cash accounts relating to the campaign.

Ex-President of the party, Luiz Inacio Lula Da Silva, is to be heard as a witness and not as part of the investigation, while Chairman Murilo Ferreira, in the role since April, is taking a leave of absence until late November. However Rousseff, who chaired the semistate when the alleged corruption took place, has been cleared of all involvement. Recent arrests have included Chief of staff Jose Dirceu and ex-party treasurer Joao Vaccari. Rousseff’s left wing administration is showing serious signs of exhaustion; personal polls put her at 8% and mass anti-corruption demonstrations continuing across Brazil’s major cities.

An official statement from Rouseff’s office last week stated that the Supreme Court’s decision is not legally binding and that an appeal is planned. The party’s supporters have claimed that the court “unduly penalises actions it fears will threaten social support for Brazil’s future.” In a further statement, the office claimed “we fulfilled our mission (as governing party) in a technical and transparent manner in search for a better future for our country.”

  • Barry Monahan, Politics Contributor