Operation Zealots also probing into purchase of provisional measures

The Federal Police believe that funds embezzled as part of the schemes

Published on 27/10/2015 - 13:23 By Agência Brasil - Brasília

Polícia Federal (Marcelo Camargo/Agência Brasil)

Operation Zealots kicked off on March 26 this year.Marcelo Camargo/Agência Brasil

The Federal Police are investigating alleged negotiations in the enactment of three provisional measures (referred to as MPs) that benefited companies probed under Operation Zealots, which had a new phase launched Monday (Oc. 26). The data can be found in Judge Célia Regina Bernardes's rulings, which included arrest orders and search and seizure warrants.

The enactment of provisional measures is a prerogative of the Executive branch. They function as laws, which means they come into effect right after the president signs them. Nonetheless, they need the approval of the National Congress, where it is subjected to its procedures and deliberations. If they are altered, they turn into bills, and, if passed, they have the president's approval.

Operation Zealots kicked off on March 26 this year. The new phase has found that a consortium made up of companies encouraged the tampering of case proceedings at the Administrative Council for Tax Appeals (CARF, in the original acronym), and also negotiated ways to benefit auto companies through tax breaks. The police estimate that the funds embezzled may amount to more than $4.9 billion.

“The evidence indicates likely influence peddling, extortion and even the corruption of public agents aimed at having legislation favorable to these companies drafted and subsequently approved,” a note issued by the Federal Police reads. The crimes investigated by the Federal Police include influence peddling, passive and active corruption, criminal conspiracy, criminal organization, and money laundering.

Provisional Measures on demand

The Federal Public Prosecution Office, which ordered the crackdown, says that the companies MMC Automotores, Mitsubishi's representative in Brazil, and CAOA Montadora Veículos, Hyundai's importer, are reported to have taken part in an “illicit enterprise,” along with two consultancies. The ministry believes that kickbacks were probably paid so that MP 471/2009, which later became Law 12,218/2010, could be enacted and benefit the ones involved.

The police and the Public Prosecution Office told the judge that the putative negotiations are also being scrutinized in MP 512/2010, which became law in 2011, and MP 627/2013, signed into law in 2014. The moves granted tax breaks to the car industry.

According to Judge Célia Regina, the current state of the investigations makes it likely that firms sought to quash tax credits at CARF and buy legislation favorable to private groups. She says: “We're looking at compelling evidence that legislation has been bought—particularly the wrongdoing that led those involved to succeed in the enactment of one more provisional measure 'on demand', but this time not for the purpose of being granted some sort of incentive or direct benefit from the government, but with the specific sordid goal.”

The companies' response

The cases developed as part of the new phase of Operation Zealots involve LFT Marketing Esportivo and Touchdown Promoção de Eventos Esportivos LTDA, which has Luis Claudio Lula da Silva among its partners—the son of former President Luiz Inácio Lula da Silva. The lawyer of both companies, Cristiano Zanin Martins, said  Monday (26) that the search and seizure order served by the police was unjustified as, he says, Touchdown bears no connection whatsoever with what Operation Zealots is investigating. Touchdown “holds football championships in Brazil, a legal activity off the scope of the operation.”

As for LFT Marketing Esportivo, the lawyer says the company was wrongfully linked to the enactment of MP 471, further remarking that the firm's date of establishment is enough to ascertain the lack of involvement with the suspicions raised. “The aforementioned MP was enacted in 2009, and LFT was only founded in 2011, two years later,” he argued.

MP 471 grants tax breaks to assembly plants and auto makers based in Brazil's North, Northeast, and Central-West.

Also in a note, CAOA stated it has never hired any natural or legal persons with the purpose of offering payments in a bid to have an MP approved. The company also stated that it has never been favored by CARF's deliberations, as it lost two appeals filed with the court.

MMC announced it has been cooperating with the authorities, as it is eager to see  facts clarified.

Translated by Fabrício Ferreira

Fonte: Operation Zealots also probing into purchase of provisional measures

Edition: Nira Foster

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