Brazil Prosecutors Find Graft Money in Tax Amnesty Program

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By Ed Taylor

Brazilian prosecutors have determined that a government program granting tax amnesty for undeclared funds deposited abroad has been used to legalize graft money from the country’s largest-ever corruption scandal.

Prosecutors announced May 4 they have verified that a former executive of Brazil’s state-owned oil company, Petrobras, took advantage of last year’s amnesty program to legalize $15 million in bribes deposited in an offshore account in the Bahamas.

The “repatriation” program granted amnesty for undeclared remittances abroad, provided companies and individuals agreed to pay a 30 percent tax and fine on these funds. The initial program ended last Oct. 31, with 103 companies and 25,011 individuals declaring a total of $52.3 billion in foreign deposits. The program generated $15.6 billion in revenues, divided between federal, state and municipal governments.

When the program was first announced, critics warned that it would be used by corrupt politicians and officials involved in a massive corruption scheme centered on Petrobras that has been revealed over the last three years. Bribes were demanded from construction companies to receive contracts from Petrobras, Brazil’s largest firm.

Bribe Money

According to prosecutors, Marcio de Almeida Ferreira, a former gas and energy manager of Petrobras, was one of the corrupt officials who secretly remitted his bribe money to a bank account in the Bahamas. Upon signing up for the amnesty program, Ferreira declared these deposits, claiming they resulted from real estate investments. He then paid $4.4 million in taxes and fines to legalize the bribes.

Prosecutors didn’t reveal how they uncovered Ferreria’s scam but warned that it demonstrates the program was flawed. Participants were required to declare that the funds deposited abroad were the result of legitimate activities, but no evidence was required to substantiate this.

“What we can verify is that the control in relation to the origin of the assets is very superficial. All that is required is the declaration of the interested party without the necessity to prove that the funds deposited abroad have a legal origin,” prosecutor Diogo Castor de Mattos told a news conference.

He added that although the program states that illegal funds can’t be included, “this case demonstrates that many managers used this means to conduct money laundering operations.”

Mattos didn’t indicate how many other persons may have been involved in this type of operation. Prosecutor Carlos Fernando dos Santos Lima told the news conference the government is now aware of the problem and “will combat the black box of the repatriation program.”

The program was reopened in April, and companies and individuals have until July 31 to sign up. Under the new version, participants will have to pay a 15 percent income tax and a fine of 20 percent on the funds they declare. They will have to declare all foreign deposits existing as of June 2016. They will receive a blanket amnesty for these deposits provided that the origin of the funds secreted abroad is legitimate.

To contact the reporter on this story: Ed Taylor in Rio de Janeiro at correspondents@bna.com

To contact the editor responsible for this story: Penny Sukhraj at psukhraj@bna.com

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