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Friday, May 26, 2017

Brazil’s Politics Are Collapsing in a Whirl of Illegal Money

Lula has resorted to very desperate means. We the spectators know it's a tactic for a failing fight.

You can tell a fighter is on his way to complete defeat when he gives up on any technique or finesse and just goes for knockout punches. If you are a fan of MMA like I am, you’ve probably seen this a few times before: the fighter starts confident, then gets shut out by his opponent. His jabs are countered, his takedowns aren’t there, his cardio doesn’t hold up that well, and he realizes he has only one tool: the puncher’s chance. Throw haymakers, crazy kicks, the kitchen sink, and pray something lands and ends the fight.

But we the spectators know what’s going on. We see that tactic for what it is and, though there is some thrilling hope it might just work, it will likely lead to a blowout defeat. And even if the punch does meet its target, the winner still comes out as the weak guy that got lucky. He’s a winner, but an exposed winner, and his next opponent knows this and will take advantage of it.

Lula has resorted to very desperate means. We the spectators know it’s a tactic for a failing fight.Our fighter today is Luiz Inácio Lula da Silva, the former president of Brazil. After so much development in Operation Car Wash, he and his allies have resorted to very desperate means: calls protests and strikes to grind the country to a halt (which failed miserably, mind you), calls for early elections, promises to arrest journalists that “lied” about him, and support for a Supreme Court that decided to grant habeas corpus to convicted corrupt politicians. If that’s not swinging for the fences in desperation, it’s hard to know what is.

At this point, the beatdown Lula has received is impressive but far from over. It’s even more impressive when you see where he came from.

How did we get here? Let’s go over the general points of this combat.

The Backstory

In 2005, Lula survived a gigantic corruption scandal to win elections in 2006 by a wide margin. In 2010 he elected his successor, Dilma Rousseff, with basically a “trust me” argument, and she was re-elected amidst a disastrous economy in 2014. His reign was untouchable, and most parties were either his allies or unwilling to challenge a semi-saint figure in the eyes of the people. For the few that dared call themselves opposition, prospects were bleak. Dilma was already installing socialist laws, calling for constitutional reform and popular councils. Brazilian state banks were financing public works all over Latin America for socialist allies, including a gigantic port in Cuba, even while Brazilian ports were collapsing.

A major migration wave from Brazil started. Everyone who saw the country was going the way of Venezuela was either boarding a plane to Canada or Miami, or planning the trip. Everyone knew people who left and even more people who wanted to. All was lost.

Then Operation Car Wash struck. A small thread of money-laundering led to arrests of Petrobras higher-ups, arrests of major construction companies CEOs and higher-ups. Plea bargains flowed at an ever higher rate. Dilma was impeached. A senator was arrested for obstructing justice, allegedly under Lula’s orders. The speaker of the house was divested and arrested. Terror struck the political class in our capital.

Falling House of Cards

All the while, Lula seemed untouchable. His network was smart: lots of plausible deniability and very few men who could really make the connection from A to B. All the men were diehard soldiers who would keep quiet till their last breath. They were arrested and convicted one by one.

All cards around Lula were falling down.João Vaccari Neto, treasurer for the Worker’s Party, was convicted to 15 years for passive corruption and money-laundering and intermediating kickbacks from Petrobrás and Renato Duque for the Worker’s Party. He was then convicted to nine more years for corruption after receiving 46 million Reais.

José Dirceu, former right-hand man and former Secretary of the Civil House to Lula (equivalent to Secretary of State), was also convicted to 23 years in jail for money-laundering and corruption. In fact, he became involved in this scheme as he was on trial for another enormous corruption scheme in 2005-06, dubbed Mensalão (roughly translated as “large monthly payment”). The schemes were the same thing: dirty money to buy support in the Legislature. All cards around Lula were falling down.

Then came Antonio Palocci, former Treasury Secretary to Lula and Secretary of the Civil House to Dilma, who was arrested in Operation Omerta for intermediating dirty money from Odebrecht to buy a plot and finance the building of the Lula Institute. Companies accused of paying the bribes started confessing and cutting deals, even though they were selective about what they confessed.

The Odebrecht Collapse

On and on they went until the key figure in this scheme, Marcelo Odebrecht, CEO of the largest construction company in Brazil and with direct contact to Lula and Dilma, finally folded.

Lula and his party were profoundly rocked. As I explained in a previous article, Odebrecht’s plea bargain had everything to be apocalyptical, and so it was. Odebrecht had 77 different collaborators in the plea bargain, and they mentioned every president since the military regime. All in all, eight federal government secretaries, three governors, 24 senators, and 39 house representatives were publicly named. Some of the accused are still under secrecy for fear of disrupting ongoing investigations.

Kickbacks were made to dozens of political campaigns, from mayors to governors.Emilio Odebrecht clearly stated that he had a long relationship with Lula when he was a big union leader brought in and paid to put down strikes in Odebrecht’s home state, and that he gave around 115 million reais for Lula’s 2002 successful presidential campaign provided that Lula would not meddle in Odebrecht’s oil and gas sectors. Odebrecht also revealed that kickbacks were made to dozens of political campaigns, from mayors to senators, house members, governors, and all in between, if approved by Antonio Palocci, who was acting as informal accountant for Lula and as middleman in negotiations.

Bribes and kickbacks were paid to secure laws to cut taxes, safeguard Odebrecht’s dominance, and grant them contracts. Just a few weeks ago, more charges were brought against Lula for selling an executive order that granted tax cuts to specific car makers in a technically unrelated, but very related case.

Braskem’s Confession

On top of this there is Braskem. Braskem is a company formed between Odebrecht and Petrobrás that was involved in major corruption scandals as well. Because its money used the US’s financial structure, it got caught up and saw no exit but to confess. Fifty million reais were paid in kickbacks for Dilma’s presidential campaign and another 100 million for her re-election, all requested by her Treasury Secretary, Guido Mantega. This was brought as evidence in an electoral court investigating her campaign for various crimes, and might get her candidacy cancelled, which might also depose current president Michel Temer. He’s expected to appeal to infinity, so it’s highly unlikely he will not last until elections in October/18.

Charges were brought on Lula at first in what can only be described as the ugliest slide in a powerpoint presentation to ever exist in Brazil. He was pointed out by the investigators in charge of Operation Car Wash as the supreme commander of the criminal organization that pillaged Petrobrás, bought the support of many political parties, sold laws and executive orders to corporate groups, diverted billions of funds in bribes and kickbacks, and tried to obstruct the investigation on many different occasions, including bribing witnesses with the help of a senator, who is now in prison.

The thesis was clear: Lula was the largest beneficiary of the whole scheme, as he received money and power as a result. The operation was still running even when some of his major lieutenants were in jail, which points to a higher coordinator. He had appointed many of the already-convicted criminals, including Renato Duque, and everyone involved was close to him.

The Money Trail

Lula is being charged for passive corruption, money-laundering, and other things, and his first trial is for an apartment built by OAS, a construction company involved in the scandal, but never formally sold to him. The apartment was renovated, gained an elevator for its three stories, a designer-made kitchen, and many other extras. Workers in the construction referred to the apartment as Lula’s. The construction engineer carried a backpack full of cash to pay for renovations, and the smoking gun: a picture was taken of Lula in the apartment. Beside him, OAS’s CEO. The case is very complicated and deeper than described here, but you get the gist. The charge was that the apartment was a kickback, along with many other things.

Then there is his country house in Atibaia. It was remodeled and upgraded by Odebrecht and OAS and includes a designer kitchen from the same company as the apartment, all paid in cash, not in his name. In a lake, two swan boats bear the name of each of his grandsons, and the bill for the boats was made in the name of one of Lula’s associates. Another boat has the names of Lula and his now-deceased wife. Many personal belongings were found in the house.

A file found in Odebrecht’s secret-bribe-paying-money-laundering-sector was also found. It was the “Italiano Spreadsheet,” an excel file for a codename “Italiano,” listing 120 million reais already paid and 200 million outstanding, with 23 million to “Friend.” A “Post-Italy” was also listed there with 50 million paid. Who might they be? Italiano is Palocci, Friend is Lula and Post-Italy is Guido Mantega. The numbers? Kickbacks owed.

Lula, his right-hand man, and the Worker’s Party received $133 million in dirty money on a single deal.His campaign marketer also took a plea bargain. João Santana and his wife were arrested in early 2016, accused of receiving tens of millions in kickbacks from Odebrecht, money-laundering, and so on. Last week their plea bargain came out, confessing that they were indeed paid millions in illegal and unnacounted money to work for Lula, Dilma, and many other presidential campaigns.

They also said that payments were often late and they had to pressure the “boss” about it, and that Dilma, while president, warned them via email when investigations were getting close. Even worse, because payments came from offshore companies and Brazilian law states that parties may not receive money from other countries, this could result in the Worker’s Party being shut down.

The last bombshell was a Petrobras director appointed by Lula, now convicted of passive corruption and money-laundering. He came forward and confessed to have received kickbacks from a deal on a company called Sete Brasil. By his very educated estimates, Lula, Dirceu, and the Worker’s Party received 133 million dollars in dirty money on one deal. Since Duque and his associates would get one third and were paid 66 million dollars, simple math solves the trick for Lula and his associates.

He further confessed that Lula contacted him through Vaccari, set up a meeting, and ordered him to get rid of evidence. In his defense statements, Lula admitted to the encounter but said it was because he heard Duque had received dirty money, became angry, and wanted to have a face-to-face questioning. He couldn’t explain why, of all people, he used his party’s accountant for that, or how he knew that Vaccari and Duque knew each other.

Ending the Fight

His defense statement was made on May 10th, and he and his party called supporters to a huge protest in his defense. Expected numbers were 30,000 to 50,000. Only some 6,000 showed up. That came in the wake of a massive strike call by the Worker’s Party that turned out to only be minor riots and some tire-burning democracy on April 28th.

And here is where it gets better. Remember Palocci? Italiano? Lula’s de facto cornerman, accountant, shield bearer, and loyal defender? He’s throwing in the towel and is in talks for a plea bargain. Many attempts were made to release him from prison, but all failed. The Omerta may finally be broken by one of its top lieutenants.

If your cornerman is picking up the towel to chuck it into the ring, you’re done.

And what is Lula’s response to all of this? An ever-escalating barrage of desperate shots. At first, Operation Car Wash’s investigations were expected to lead nowhere, like many others before. In 2015, as businessmen were arrested and started talking, movements were made to set them free and bury everything, but public outcry stopped this.

Lula’s own cornerman and accountant is throwing in the towel for a plea bargain.A law was drafted to give leniency to companies involved in the scandals, requiring only a fine but no statements, but the law failed to make it to a vote. Recently we discovered that the law was essentially written by Odebrecht, since Marcelo Odebrecht was in jail and his father was desperate to set him free. In late 2015, a senator was arrested for obstruction of justice for trying to bribe a key witness into silence and smuggle him to Spain. Said senator confessed that he did it under orders from Lula.

In 2016, impeachment talks came and the government tried desperately to survive, handing out political appointments and pulling all strings. Dilma’s defense was that the impeachment was nothing but a coup. The idea was ridiculed by the majority of the population, and Dilma was ousted. At the eleventh hour she even appointed Lula as the equivalent of the Secretary of State in a desperate bid for salvation, but the nomination was voided by the Supreme Court. This was dubbed a self-coup or a blank resignation by Dilma.

After the impeachment, Lula’s defense turned into a claim that he was politically persecuted. He and his allies flew around the world denouncing the investigation as a partisan tactic, which was widely received as ludicrous. As his henchmen were convicted one by one, they were accused of lying, creating a conspiracy, and much more. Talks were held that Lula would flee to Uruguay and claim political persecution.

New attempts were made to pass legislation pardoning all unaccounted donations to campaigns, opening an argument in which all politicians could claim that bribes were in fact campaign donations and walk away. Twice this was attempted, twice it failed. Another piece of legislation was attempted to contain “abuse of authority” in a clear attempt to criminalize investigations. Its wording was so loose that a judge could be arrested for seemingly everything. The final text was almost completely divested of its nefarious tools and passed silently and without damage to the investigations.

In 2017, the most creative strategy, so to speak, came out: the leading judge, Sergio Moro, was accused of trying to become president and wanting to arrest Lula to avoid competition. Politicians came out claiming the investigations were abusive, excessive, and even harming the economy, in a desperate bid to delegitimize the investigation and open the public to legislation protecting corrupt politicians. It also failed.

Lula even went as far as claiming that “they” should arrest Moro quickly, otherwise he would be elected and arrest all who lied about him. Arresting dissenters, ladies and gentlemen, arresting dissenters. Can you see the desperation? Can you smell the panic?

If that’s not a fighter on a direct path to defeat, I don’t know what is.

How Will it End?

Lula is expected to be convicted in June and the sentence upheld sometime early 2018. If upheld, he goes to jail and becomes unelectable. His party is going broke and dismantling, his followers are deserting, his former sponsors are ratting him out, and the Worker’s Party is expected to suffer a gigantic defeat in 2018 elections, following a 2016 near-wipeout in municipal elections.

Charges are being brought to Lula individually, which means that even if he slides from one, he will still have a dozen or more ahead. Years and years of courts await him, and many construction companies haven’t cut their plea bargains yet, including OAS, the one that built the apartment Lula is being accused of getting as a kickback. The meat sector and banking sector might end up embroiled in this too.

But let’s go on a limb here. Suppose he does dodge all of this. Suppose he does run and does get elected by our voting machines that are not auditable and are made by the same company that does Venezuela’s machines. Suppose the fighter does land a lucky knockout blow. What then?

Protesters came out in the millions against Dilma on many occasions. Spontaneous protests erupted against Lula when he was suddenly nominated by Dilma as Secretary of State, bringing the country to a near-complete halt on a moment’s notice, with no planning behind them. People just got fed up and went to the streets all over Brazil in what could easily have turned into a revolt. 

On top of this, secession movements are popping up all over Brazil. If Lula does escape this, a feat that would leave Houdini humiliated, the country just might break apart for good.

Bonus: Lula was greeted in Curitiba, the city where investigations are being held, by dozens of billboards saying they welcome him with their open jail cells. Do note that the city is name Curitiba Republic, a term Lula himself used to disqualify the investigations but that was lovingly received by the population and even became a secessionist motto.  

Truly a sight to behold.

  • Raphaël Lima is a popular media commentator and author in Brazil. His youtube channel is one of the largest and most closely watched in the country.