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Brazil Targets Petrobras Contractors as Corruption Probe Expands

FILE - People walk in front of Brazilian oil company Petrobras's headquarters in Rio de Janeiro, Nov. 14, 2014.

Brazil's comptroller general opened cases on Wednesday against eight engineering conglomerates suspected of bribery and fraud in deals with Petrobras, holding them accountable for their role in a widening corruption scandal at the state-run oil company.

If found responsible for the alleged graft scheme, some of Brazil's biggest infrastructure and construction firms could be blocked for years from taking government contracts, complicating President Dilma Rousseff's push to expand investments in roads, bridges, rail lines and energy projects.

Executives at Camargo Correa, Engevix, Galvao Engenharia, Iesa, Mendes Junior, OAS, Queiroz Galvao and UTC-Constran were arrested last month as police investigated allegations of overcharging the oil company, known formally as Petroleo Brasileiro SA, in return for kickbacks to politicians and executives.

Supporting evidence

The comptroller general's office said that testimony from the police investigation, along with documents, emails, phone records and wire transfers, had provided evidence to open proceedings against the companies.

Lawyers for the companies have approached Brazil's top prosecutor, Rodrigo Janot, to propose a plea deal, he told reporters on Wednesday. Janot said, however, that the implicated executives would have to admit involvement in the graft scheme as part of any settlement.

The case is dominating Brazil's political landscape and overshadowing Rousseff's plans for a second term starting in January. She was chair of Petrobras' board of directors from 2003 to 2010, when many of the alleged bribes and kickbacks happened, but she has denied knowledge of or involvement in the corruption scheme.

The scandal also has intensified scrutiny of corporate governance at Petrobras, where some minority shareholders have complained of lax oversight and outsized government influence.

Shareholders' rights violations

A spokesman for securities watchdog CVM said on Wednesday that Petrobras CFO Almir Barbassa violated shareholders' rights by letting state development bank BNDES and state-led pension funds vote on board members who should be elected solely by minority investors.

The CVM spokesman said that without admitting any wrongdoing, Barbassa agreed to pay a fine of 250,000 reais ($98,000), while BNDES and its subsidiary BNDESPAR each agreed to pay 500,000 reais.

Petros, the pension fund for Petrobras workers, also faces a fine of 400,000 reais, and the CVM spokesman said it warned two other pension funds about their conduct.

At a congressional hearing on Tuesday, a former executive who helped to uncover the bribery and kickbacks said political parties have dominated the appointment of senior management at Petrobras for years, highlighting the need for independent oversight.