Odebrecht, Lula and family values

The construction giant founded 70 years ago in Salvador, Bahia, by engineer Norberto Odebrecht was the first Brazilian company to win a public bid in the US during the 1990s, currently operates in 23 countries and generated US$41bn in revenue in 2013. Its secret to success? In a 2014 interview with consulting firm McKinsey, chairman Emílio Odebrecht credited a set of core principles and values built on his father Norberto's philosophy.

Hailed for years not only as Latin America's biggest engineering group and the first Brazilian company to go global, but also as a family-owned conglomerate supposedly run on family values, Odebrechtis now awash in legal troubles for allegedly being part of a scheme to defraud state-run oil company Petrobras of some US$2bn.

Emílio's son, CEO Marcelo Odebrecht, has been in police custody since being arrested on June 24 and is charged with corruption, money laundering and criminal conspiracy. Prosecutors say the third-generation chief executive of the family knew the group was part of a cartel of engineering firms overbilling Petrobras.

The cartel reportedly included other major engineering companies such as Andrade Gutierrez, Queiroz Galvão, Camargo Corrêa and OAS, and funneled cash to the ruling workers' party – a scandal known as Lava Jato, or Car Wash, that has rocked an already flailing Brazilian economy.

Together, these family-owned engineering firms are among Brazil's top job creators and the highest recipients of loans from state banks. The country's executive and judicial powers have gone after the executives running the firms, but the companies themselves are operating pretty much as usual. Marcelo Odebrecht is in jail, but his conglomerate has not lost any contracts as a result of the scandal.

Brazilian federal judge Sergio Moro has said that plenty of evidence that has surfaced since November links Marcelo Odebrecht to Lava Jato, including an e-mail the chief executive received that talked about overbilling.

POLITICAL CONNECTIONS

The investigation has also dragged down the ruling workers' party and the approval rating of President Dilma Rousseff. Marcelo Odebrecht has had a close relationship with former Brazilian president Luiz Inácio Lula da Silva, and prosecutors have begun looking into whether 'Lula' inappropriately benefited the conglomerate once he was out of office. (Influence peddling is a crime in Brazil.)

In an August report, Bloomberg News cited a US$1.2bn 'bridge to nowhere' built by Odebrecht over the Orinoco river in Venezuela that was opened in 2006 by Lula and then-president Hugo Chávez. The news service says that few people today use the Orinoquia bridge, "which seems to connect nowhere to nowhere."

Investigators are probing Lula's alleged help in securing for Odebrecht international contracts funded by Brazilian development bank BNDES. (Odebrecht projects have received most of the bank's US$11.9bn in overseas loans since 2007, according to Bloomberg.) Reuters reported on allegations that Odebrecht won contracts in Cuba and Angola while contributing to a foundation run by the former president, and paying him to give speeches.

SLAVE LABOR

Meanwhile, the conglomerate's reputation took another blow this week when a Brazilian labor court convicted units of the Odebrecht group of holding workers in slave-like conditions at an ethanol refinery project in Angola.

Odebrecht will pay US$13mn in damages for luring Brazilian workers to Angola, where they were forced to work in unhealthy conditions, their passports seized, and their ability to leave work blocked by armed guards even on rest days, according to the court's ruling cited by the media.

In the interview with McKinsey, Emílio Odebrecht said "preserving values" was one of the ways in which the group's family ownership system worked. In light of all the information about the Odebrecht group that has surfaced in less than a year, one has to wonder what values he was talking about.