Investigating a Company “As Big as Brazil”

“Petrobras is bigger than all of us,” declared Brazilian President Dilma Roussef. “Petrobras is as big as Brazil.” Brazil’s federal police had raided the state-run oil company’s headquarters three days earlier, on April 11, and President Roussef was defensive. “No one and nothing,” she said, “will destroy Petrobras.” That the probe proceeds despite President Roussef’s warnings demonstrates the power of the Brazilian people. While it is too early to know whether Brazil will prosecute its biggest company, the investigation, and a separate congressional inquiry, may be testaments to the impact that mass public protests — involving more than 1 million protestors over the course of the last year — have had on prosecutors and government officials.

The Petrobras probe’s initiation months before a presidential election, and the political battle surrounding it, however, raise a red flag: are the people speaking, or are powerful political groups?

President Roussef, who headed Petrobras’ board during the allegedly corrupt refinery acquisition, claims that the accusations of corruption, months before a presidential election, are politically motivated. Whether President Roussef’s reading of the opposition’s motives is right, she identifies a real problem.  Accusations of corruption might be “part of Brazil’s political game.” A sensational story, as Eden astutely observed, can smear and disrupt and harm, potentially notwithstanding the ostensibly level-headed assessments by investigators and international organizations. Political pressure, either true grassroots activism or “astroturfing“, can lead investigators on wild goose chases. Combined with the Brazilian anticorruption law’s multiple enforcement levels, there is cause for concern.

There are, of course, positives to public scrutiny and input. Public pressure takes away some prosecutorial discretion that, as Anna noted, can be deployed to benefit political allies and harm political foes. Because Petrobras is uniquely important to the Brazilian economy – and to the ruling Worker’s Party in an election year – it is possible that the company’s misconduct would otherwise be overlooked.

Whether public pushes for anticorruption enforcement are good or bad thus turns on an empirical question this post does not purport to answer – whether investigations that occur because of popular pressure will, in the end, yield evidence of actual corruption. (Though, as Matthew has said, there are normative issues implicated in politically motivated anticorruption enforcement, even when the targets are indeed guilty.)

For now, it seems the positives outweigh the negatives. Brazil has taken enormous strides against corruption since protests began a year ago. Since enacting the Clean Companies Act, Brazil has launched corruption probes into at least 18 different companies, including Siemens AG and Alstom SA. But for the Brazilian public’s outcry against corruption, Petrobras — 60.5% of which is owned by Brazil, would not likely be subject to Brazilian investigation.

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