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Brazil’s corruption probe means a boom time for lawyers

Por: Financial Times ImprimirVisualizar em PDF

With its concrete beds and squat toilets, the Complexo Médico-Penal is probably not where Brazil's top construction and oil executives had pictured spending their retirement.

Normally reserved for mentally ill prisoners, the prison lies at the end of a potholed road on the banks of the Iraí reservoir in the southern state of Paraná. From the outside, a dilapidated brick archway at CMP's entrance gives it the appearance of a rundown farm. However, an aerial view reveals its sinister layout, with the cells arranged in the shape of a giant machine gun.

For most of the past year, it has been home to Marcelo Odebrecht, head of Latin America's largest construction group; João Vaccari Neto, former treasurer of the leftwing Workers' party, Brazil's largest political party, and other suspected ringleaders of the vast corruption scandal at Petrobras, the oil company.

Federal police in Curitiba, Paraná's state capital, who are leading the graft investigation, were forced to transfer many of those detained in the bribery and kickback scheme to CMP in March last year after the city police station ran out of space.

Initially an investigation into money laundering at a petrol station, the Lava Jato (Operation Car Wash) corruption scandal has escalated into Brazil's largest investigation, not only stretching police resources but also creating the biggest challenge yet for the country's criminal lawyers.

A simple calculation reveals the scale of the problem. After two years of investigations into the scheme, in which Petrobras executives and their contractors conspired with politicians to cream billions of dollars off the oil company's contracts, the authorities have made 166 arrests and 105 convictions, issuing prison sentences totalling 1,141 years. Thousands more people have been questioned.

Yet lawyers say Brazil has fewer than 30 law firms capable of taking on such a case. Emboldened by the Lava Jato case, Brazil's federal police and public prosecutors are expected to pass them even more work in the years ahead, as they try to clamp down on the country's culture of corruption and impunity.

In May, police indicted the chief executive of Bradesco, Brazil's second-largest non-state bank, in connection with a separate investigation into graft at the country's tax offices. Operation Zelotes, as the investigation is known, has already implicated senior executives of steelmaker Gerdau and Joseph Safra, a banker and Brazil's second-richest man. All deny wrongdoing.

"The hardest part is when you have a client who is actually detained as the time period to act is very short," says Antônio Carlos de Almeida Castro, lawyer to billionaire banker André Esteves, who was arrested in November for allegedly plotting to buy off a Lava Jato witness. After three weeks in Rio de Janeiro's notoriously dangerous Bangu jail, where Mr Esteves's head was shaved to keep away lice, the founder of BTG Pactual was released on home arrest and later freed by the Supreme Court pending further investigation. He denies the accusations.

However, while the extra workload has given Brazil's criminal lawyers sleepless nights, it has also brought them fame and — to an even greater extent — fortune.

As one lawyer said: "When your client is suddenly thrown in jail, they are less likely to want to bargain with you over the cost of legal fees."

Alexandre Bertoldi, managing partner at Pinheiro Neto law firm in São Paulo, says he has seen white-collar crime lawyers in the country charging anything from R$500,000 to R$10m ($142,000 to $2.8m) for initial representation "packages".

"When someone is put under preventive custody, the lawyer's first job is to get them out but that is only the beginning — then the prosecutors must decide whether to pursue formal charges, then there may be a trial and then appeals," says Mr Bertoldi.

Lava Jato is proving to be a boon for foreign law firms, offering them a rare opportunity to break into Brazil's highly protectionist legal market. US-based Quinn Emanuel Urquhart & Sullivan and Gibson, Dunn & Crutcher have conducted internal investigations for BTG and Petrobras respectively, while other firms have advised on cross-border aspects of the case. Investigators have requested co-operation from 30 countries, from Switzerland to China.

However, it is not only the scale of Lava Jato that has created extra work for lawyers, but also the style of the investigation headed by the lower court judge Sérgio Moro. Taking inspiration from the "clean hands" corruption investigation in Italy in the early 1990s, the Harvard-trained judge has relied heavily on preventive arrests and plea bargains to get results. Lawyers must act quickly to free their clients from jail and their work must be technically excellent, given the high visibility of the case. If their client then signs a plea bargain with prosecutors, that creates further problems as their testimony could incriminate other Lava Jato suspects defended by the same firm.

"If there is a conflict the lawyer can't take on the case under any circumstances as this would be ethically incorrect and they could be punished by the Brazilian Bar Association," says Cristiano Zanin, lawyer to Luiz Inácio Lula da Silva, the former president. In one of Lava Jato's most dramatic developments, Mr Lula da Silva was detained for questioning in a dawn raid at his home in March.

Many Brazilians have delighted in seeing the country's most powerful figures behind bars, hailing Judge Moro and the public prosecutors as heroes. "Most people my son's age have more sympathy with the prosecutors … these are the careers that will be more sought after now," says Mr Bertoldi.

But the detentions are a source of resentment for many in the profession, who argue that keeping suspects in the country's gruesome jails before a judge has weighed the evidence against them is a flagrant violation of human rights.

While prosecutors argue that such detentions are necessary to prevent suspects from interfering with the investigation, others argue that it is a way of bullying executives and politicians into testifying in exchange for release.

"Brazil is going through a punitive phase," says Mr de Almeida Castro. "We are all tired of corruption but I also believe in freedom and the right of defense."

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