LESSONS OF OPERATION CAR WASH A legal, institutional, and economic analysis Organized by Fabio Ramazzini Bechara & Paulo C. Goldschmidt Available from: BRAZIL INSTITUTE Woodrow Wilson International Center for Scholars One Woodrow Wilson Plaza 1300 Pennsylvania Ave., NW Washington, DC 20004-3027 www.wilsoncenter.org/brazil Cover: Shutterstock ISBN: 978-1-7359401-1-3 November 2020 Lessons of Operation Car Wash: A Legal, Institutional and Economic Analysis Brazil Institute | Wilson Center Washington, DC © Woodrow Wilson International Center for Scholars 2020 The Wilson Center, chartered by Congress as the official memorial to President Woodrow Wilson, is the nation’s key non-partisan policy forum for tackling global issues through independent research and open dialogue to inform actionable ideas for Congress, the Administration and the broader policy community. Conclusions or opinions expressed in Center publications and programs are those of the authors and speakers and do not necessarily reflect the views of the Center staff, fellows, trustees, advisory groups, or any individuals or organizations that provide financial support to the Center. Jane Harman, Director, President, and CEO BOARD OF TRUSTEES Chairman of the Board Bill Haslam, Former Governor of Tennessee Vice Chair Drew Maloney, President and CEO, American Investment Council Public Members: Alex Azar, Secretary, U.S. Department of Health and Human Services Elisabeth DeVos, Secretary, U.S. Department of Education David Ferriero, Archivist of the United States Carla D. Hayden, Librarian of Congress Jon Parrish Peede, Chairman, National Endowment for the Humanities Michael Pompeo, Secretary, U.S. Department of State Lonnie G. Bunch III, Secretary, Smithsonian Institution Private Citizen Members: Peter J. Beshar, Executive Vice President & General Counsel, Marsh & McLennan Companies, Inc. Thelma Duggin, President, AnBryce Foundation Barry S. Jackson, Managing Director, The Lindsey Group and Strategic Advisor, Brownstein Hyatt Farber Schreck David Jacobson, Former U.S. Ambassador to Canada and Vice Chair, BMO Financial Group Nathalie Rayes, Vice President of Public Affairs, Grupo Salinas Earl W. Stafford, Chief Executive Officer, The Wentworth Group, LLC Louis Susman, Former U.S. Ambassador to the United Kingdom TABLE OF CONTENTS 4 Preface 6 Introduction 14 Chapter 1: Operation Car Wash: What Does That Mean? By Fernanda Regina Vilares 22 Chapter 2: Anticorruption Policies in Brazil and the Operation Car Wash: Institutional and Economic Analysis By Ligia Maura Costa, Maria Lucia L.M. Padua Lima, and Paulo C. Goldschmidt 52 Chapter 3: International Legal Cooperation in the Car Wash Operation By Maria Thereza Rocha de Assis Moura and Marta Saad 68 Chapter 4: Plea Agreements in Brazilian Law: The Operation Car Wash Experience By Marcos Zilli 84 Chapter 5: Destination of Goods, Rights, and Assets in Operation Car Wash: Critical Analysis and Perspectives on Improvement By Fabio Ramazzini Bechara and Gianpaolo Poggio Smanio 112 Chapter 6: Main Dogmatic Aspects of Corruption Crimes in Brazil Related to Operation Car Wash By Adriano Teixeira and Raquel Scalcon 124 Chapter 7: Responsibility for Omission and Compliance in the Car Wash Operation By Marco Aurélio Florêncio Filho and Giovani Agostini Saavedra Shutterstock Preface Brazilians could barely believe their eyes Federal Judge Sérgio Moro, who had when they saw the country’s Supreme worked in the earlier investigation of the Court announce on television, in October vote-buying scheme in Congress, emerged 2012, guilty verdicts against 25 politicians, as an early champion of Operation Car business executives, and operatives involved Wash, which he turned into a crusade to in a Congressional vote-buying scheme. expose and punish “systemic corruption” in Twelve of the 25 individuals convicted Brazil—with enormous popular support. On received lengthy prison sentences, unprec- Sunday, March 13, 2016, some 3.4 million edented in a nation where the powerful had Brazilians (according to police estimates) benefited from a culture of impunity since took to the streets in 262 cities to protest its formative years as a Portuguese colony. against the Petrobras corruption scheme. José Arthur Giannotti, a retired professor of Less than two years later, in 2014, the fed- philosophy at the University of São Paulo, eral public prosecutor’s office launched an noted at the time “People asked for the investigation into alleged corruption at the moralization of Brazilian politics.” state-owned energy giant Petrobras, expos- ing a cartel—formed at the highest levels Yet the legacy of Operation Car Wash is between Petrobras officials and senior exec- complicated. It has come under scrutiny for utives of Brazil’s largest construction com- its controversial use of plea bargains and panies—designed to skim millions of dollars pre-trial detentions, and a seeming willing- off of contracts to develop rich offshore oil ness, on the part of some of the officials fields. It was simultaneously a confirmation involved, to bend the rules in pursuit of of the sheer scale of systemic corruption in convictions, leading to allegations that the Brazil and evidence that impunity was no probe was being used for political ends. longer guaranteed. The massive scandal also had the net The Petrobras corruption scandal—the effect of discrediting all members of the largest in Brazilian history—was the genesis political establishment, and opened a path of Operação Lava Jato, named after a car for Congressman Jair Bolsonaro, a former wash in Brasilia used initially to launder illicit army captain who had been pushed out of money obtained by the scheme. But it the the military, to mount a successful pres- operation soon expanded far beyond Peto- idential campaign in 2018. Once elected, bras. Hundreds of politicians, government President Bolsonaro named Sérgio Moro as officials, and private sector executives were his Minister of Justice and Public Security. arrested, tried, sentenced, and sent to jail. Arguing that as minister he could take the Among them were former Speaker of Cham- fight against corruption to a new level, Moro ber of Deputies Eduardo Cunha, who had joined the government—but in doing so, he launched a successful impeachment against strengthened concerns over the politiciza- President Dilma Rousseff, and former Presi- tion of the operation. The decision marked dent of Brazil Luiz Inácio Lula da Silva. THE LESSONS OF OPERATION CAR WASH 4 the effective end of Lava Jato; although Getulio Vargas, Mackenzie Presbyterian Un- the formal end did not occur until this year. viersity, and the University of São Paulo. What, then, are the legacy and lessons of Operation Car Wash? It will take time and considerable per- sistence to establish a culture of transpar- Born from a proposal developed by São Pau- ency and accountability in Brazil. Operation lo state prosecutor and law professor Fabio Car Was was, at best, a beginning of the Ramazzini Bechara, a Global Fellow of the process. Yet as the authors of this volume Wilson Center’s Brazil Institute, the follow- note, it was also a watershed moment ing chapters analyze the impact of Lava Jato for Brazil—and one that set in motion the on systemic corruption and impunity in Bra- development of better mechamisms, greater zil. The Wilson Center has been honored to knowlege, and deeper partnerships—in Bra- work on this project alongside three leading zil and abroad—to investigage and prosecute academic institutions in Brazil: the Fundação systemic corruption. Paulo Sotero & Anya Prusa Washington, DC, November 2020 5 THE LESSONS OF OPERATION CAR WASH Introduction This book is about combating corruption procedures and rituals, as well as mecha- in Brazil, especially systemic corruption. It nisms of generating common strategies, does not deal with petty corruption. Al- planning, management, logistic control of though all types of corruption should be corrupt transactions, and protection from firmly opposed, systemic corruption is far exposure. Differently from an individual more important than petty corruption in corruption which is normally understood as terms of what it represents in the institu- a deviant or pathological behavior of an indi- tional, political, and economic scenarios for vidual aimed at abusing powers entrusted to the country. The damage imposed on Brazil him/her for personal gain, the phenomenon due to systemic corruption implemented by of systemic corruption is an informal patho- political forces in the last two decades is of logical institution with parasitical attachment an unprecedented magnitude when com- to formal institutions of politics and public pared to any other country in the world. administration.”2 Systemic corruption may be characterized In addition to supporting the continued fight as “a situation in which major institutions against systemic corruption, the works in and processes of the state are routinely this book share another common thread: dominated and used by corrupt individu- the use of Operation Car Wash as a central als and groups, and in which most people focus for each chapter’s specific theme. In have no alternatives to dealing with corrupt general terms, Operation Car Wash may officials.”1 In this sense, systemic corrup- be viewed as a method for uncovering the tion should be viewed as involving practic- crimes perpetrated by individuals, public of- es which are permanent, centralized, and ficials, politicians, and private organizations widespread in government activities. A against