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CADE investigates bid rigging in public bids of Complexo Lagunar and Mitigação de Cheias do Norte e Noroeste Fluminense in the scope of the “Car Wash” operation


Confidential inquiry has been conducted by CADE and a partial leniency agreement was signed this month
published: Jul 04, 2017 04:29 PM last modified: Jul 04, 2017 04:29 PM

On 27 June the General Superintendence of the Administrative Council for Economic Defense – CADE and the Federal Prosecution Service of Rio de Janeiro – (MPF/RJ, for its acronym in Portuguese) signed a partial leniency agreement with the company Andrade Gutierrez S/A and its current and former executives. The agreement was signed under the scope of Administrative Inquiry 08700.007277/2013-00. The investigation concerns alleged bid rigging in public bids conducted by the Secretariat of State for the Environment of Rio de Janeiro (SEA/RJ in its acronym in Portuguese) for recovery works and environmental revitalization of lakes in urban areas and containment works and flood control of rivers, including engineering services, dredging, desorption and construction of dams and jetties.

As provided by Law 12.529/2011, the leniency agreement is aimed at obtaining information and documents, which serve as evidence against the cartel, beyond identifying the other cartel participants. The partial leniency agreement, in turn, can be established when the conduct is already known to CADE, but does not have sufficient evidence to secure a condemnation. The partial leniency does not grant total immunity to its signatories, like the traditional leniency agreement, but confers to them a penalty reduction of 1/3 to 2/3 in the sentence imposed by CADE’s Tribunal in its final judgment.

CADE has investigated this case since 2013, through a confidential inquiry related to possible anticompetitive conducts in these bids, which were revealed by the Brazilian magazine, Época. The magazine pointed to evidence of overpricing, at least, in the bids of the Complexo Lagunar – Concorrência Nacional CO SEA nº 01/2013 and of the Mitigação de Cheias do Norte e Noroeste Fluminense – Concorrência Nacional CO SEA nº 03/2012.

By means of the leniency agreement, the company Andrade Gutierrez S/A and its current and former executives admitted their participation in the conduct, provided information and evidence with the purpose of collaborating with the investigation of the alleged cartel.

The agreement negotiated with CADE for a period of ten months concerns only the anticompetitive practice. The MPF/RJ, in turn, negotiated a plea bargain with the current and former executives of the company in the scope of an ongoing criminal case being investigated by the Federal Justice of Rio de Janeiro.

According to CADE’s General Superintendence, the violations to the economic order encompassed price fixing of proposals, provision of conditions and anticompetitive advantages; division of market between competitors, through consortium formation and cover proposals; and in the exchange of commercial sensitive information.

The companies allegedly involved in the scheme are Andrade Gutierrez Engenharia S/A, Carioca Christiani-Nielsen Engenharia S/A, Construtora Norberto Odebrecht S/A, Construtora OAS Ltda. and Construtora Queiroz Galvão S/A, as well as, at least, ten executives and former executives of these companies. It is worth notice that the signatories of the partial leniency agreement did not identified Carioca Engenharia as engaged in the irregularities of the works related to Lagunar Complex and the involvement of OAS in the works of Mitigação de Cheias do Norte e Noroeste Fluminense.

Modus Operandi

The public bid of Lagunar Complex concerns environmental recovery and revitalization of four lagoons in the Jacarepaguá watershed (lagoons of Jacarepaguá, Camorim, Tijuca and Marapendi), in the city of Rio de Janeiro. Moreover, the public bid of Mitigação de Cheias do Norte e Noroeste Fluminense concern the flood contention of rivers Muriaé and Pomba, which crosses the municipalities of Laje do Muriaé, Itaperuna, Italva, Cardoso Moreira and Santo Antônio de Pádua.

The consortium Complexo Lagunar, composed by Andrade Gutierrez, OAS and Queiroz Galvão, won the public bid of Lagunar Complex works. In turn, the consortium Mitigação de Cheias do Norte e Noroeste Fluminense, comprised by Carioca and Odebrecht, won the contract for the works of mitigation of flood in the north and northwest Fluminense. The group, composed by the five alleged colluding companies, would have organized a scheme to share the contracts among themselves. On the occasions in which they were not the winners of the public bid, the companies presented cover proposals.

The communication amongst competitors was likely initiated in 2012, when the Complexo Lagunar bid became public, and would have lasted, at least, until May 2014, with the adjudication of the contract in reason of the flood issue in the north and northwest of the state.

Anticompetitive Conduct Records and Administrative Inquiry

Part of the Leniency Agreement consists in a document called the Anticompetitive Conduct Records (HC, for its acronym in Portuguese), in which CADE’s General Superintendence describes in detail the anticompetitive practice as reported by the signatories and complemented by the probative documents submitted. By mutual agreement, CADE, MPF/RJ and the signatories have partially waived the confidentiality of the agreement and its annexes.

At the end of the Administrative Inquiry, CADE´s General Superintendence decides on the initiation of an Administrative Proceeding, in which the evidence of an economic infraction is gathered and the individuals and legal entities are notified to present their statements. At that stage, the defendants will be notified to present their defense. In the end of the investigation, the General Superintendence issues an opinion on the conviction or the filing of the case concerning each defendant. The conclusions are then forwarded to CADE’s Administrative Tribunal, which is responsible for issuing a final decision.

The final judgment in the administrative sphere is the responsibility of the Administrative Tribunal, which may impose fines of up to 20% of a company´s turnover. Fines ranging from BRL 50 thousand to BRL 2 billion may also be imposed to individuals. The Tribunal may also take other measures that it deems necessary to cease the conduct.

CADE's Leniency Agreements under the Car Wash Operation

This is the eighth leniency Agreement signed with CADE within the scope of the Car Wash Operation. The previous agreements were signed with Setal/SOG and employees concerning the public bids in Petrobras’ onshore platforms; with the company Camargo Corrêa and employees in public bids regarding Angra 3 nuclear plant and the North-South and West-East Railroads; with Camargo Corrêa and its current and former employees in public bids regarding the implantation of the North-South railway and of the West-East integration railway; with Andrade Gutierrez and executives of the company; the first one regarding an alleged cartel in the public bids to build and operate the Belo Monte hydroelectric power plant; the second agreement due to an alleged cartel in the public bid for engineering and construction works for the urban improvement of the Alemão, Manguinhos and Rocinha neighborhoods in Rio de Janeiro; with Carioca Christiani Engenharia and its current and former executives regarding Petrobras’ headquarters; and with Andrade Gutierrez its current and former executives regarding public bids for the construction of World Cup 2014 stadiums.