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CADE, Federal Prosecution Office at the state of Goiás and Federal Police carry out dawn raids to investigate alleged cartel in railways bids

Dawn Raid

The Operation is an outcome of the “Car Wash Operation”, based on a new leniency agreement signed by CADE and Camargo Corrêa
published: Jul 01, 2016 06:50 PM last modified: Jul 01, 2016 07:23 PM

CADE’s General Superintendence carried out on 30 June, together with the Federal Prosecution Office at the state of Goiás - MPF/GO and the Brazilian Federal Police, the fulfillment of 17 search and seizure warrants in 12 engineering companies involved in alleged bid riggings of the company Engenharia, Construções e Ferrovias S/A – Valec, in the Brazilian market of works for the implementation of the North-South Railway – FNS in its acronym in Portuguese – and the West-East Railway – FIOL in its acronym in Portuguese. Another 27 search and seizure warrants are being fulfilled only by MPF/GO and the Federal Police in other engineering companies and domiciles, besides 14 coercive conduction warrants.

In total, 51 employees from CADE and 200 police officers participated of the so-called “Periodic Table Operation, which is an outcome of operations conducted in the “Car Wash Operation”. The warrants were fulfilled in the states of Distrito Federal, Rio de Janeiro, Minas Gerais, São Paulo, Ceará, Paraná, Bahia, Espírito Santo e Goiás. 

In February 2016, the MPF/GO and the Federal Police had already initiated the Operation “The Recipient”, which investigated corruption schemes, money laundering and bidding crimes, involving big contractors of the Valec’s railways construction. In May 2016, the MPF/GO made a complaint against eight individuals to the Judiciary. The operation of 30 June investigated especially the crime of cartel.

The investigation occurs through CADE’s General Superintendence Administrative Inquiry No 08700.001836/2016-11, which was subsidized, in April 2016, by  a leniency agreement signed with the company Construções e Comércio Camargo Corrêa S/A – CCCC and some of its employees and former employees. This leniency agreement was signed with the MPF/GO. Through common agreement, CADE, MPF/GO and the leniency signatories have waived, partially, the confidentiality of the agreement and its annexes. In the interest of the investigations, some documents and information are stillkept under restrict access. A public version of the “Historic of the Conduct” was made available (Portuguese version). 

The investigations of CADE, MPF/GO and the Federal Police showed clear cartel signs consisted in agreements for the sharing of bids between competitors, fixing advantages in order to frustrate the competitive nature of some Valec’s bids destined to the construction of stretches of the North-South and West-East  Railways. These illicit practices, if proved, tend to indicate that many railway works, in Brazil, were hindered or executed for higher prices, detrimentally of users of the railway transportation and the government treasury.

The initial evidence indicate that the cartel may have begun, at least in 2000, lasting until 2010 and involving about 37 companies, during this period. Among them, 16 companies were targeted in the leniency agreement as effective participants; meanwhile, another 21 would be possible participants.  

The 16 effective participants, according to the evidence, would be: Carioca Christiani Nielsen Engenharia S/A, Constran S/A Construções e Comércio, Construções e Comércio Camargo Corrêa S/A, Construtora Andrade Gutierrez S/A, Construtora Barbosa Mello S/A, Construtora Norberto Odebrecht S/A, Construtora OAS S/A, Construtora Queiroz Galvão S/A, C.R. Almeida S/A - Engenharia de Obras, Egesa Engenharia S/A, Galvão Engenharia S/A, Mendes Junior Trading e Engenharia S/A, Pavotec Pavimentação e Terraplanagem Ltda., Serveng Civilsan S/A Empresas Associadas de Engenharia, Servix Engenharia S/A, e SPA Engenharia, Indústria e Comercio Ltda. 

The other 21 investigated companies, pointed out as possible participants, are: CMT Engenharia Ltda., Construtora Almeida Costa Ltda., Construtora Cowan S/A, Construtora Sanches Tripoloni Ltda., Construtora Ourivio S/A, Convap Engenharia e Construções S/A, Delta Construções S/A, Embratec - Empresa Brasileira de Terraplenagem e Construções Ltda., Empresa Tejofran de Saneamento e Serviços Ltda., Estacon Engenharia S/A, Fidens Engenharia S/A, FuadRassi Engenharia Indústria e Comércio Ltda., Paviservice Serviços de Pavimentação Ltda., Pedra Sul Mineração Ltda., Pelicano Construções S/A, S.A. Paulista de Construção e Comércio, Sobrado Construção Ltda., Somague Mph Construções S/A, TIISA Triunfo Iesa-Infra Estrutura S/A (atual Tiisa – Infraestrutura e Investimentos S/A), Top Engenharia Ltda. e TRIER – Engenharia Ltda.

The materials obtained in the leniency agreement and in the operations will subsidize the investigations, together with other diligences and evidence collected by CADE’s General Superintendence, including the materials of the inquiries and the criminal proceedings conducted by the MPF/GO and the Federal Police. CADE has already judicial authorization in order to share the evidence obtained in the operation perpetrated on 30 June.

By the end of the Administrative Inquiry, the General Superintendence will decide on the possibility of opening an Administrative Procedure, in which the collected evidence of the violation against the economic order will be pointed out and the individuals and companies will be accused. In this phase, the parties will be notified to present their defense. By the end of the instruction, the Superintendence emits an opinion for the conviction or for the filing of the case, in relation to each party. The conclusions are taken to CADE’s Administrative Tribunal, responsible for the final decision.

The final judgement in the administrative sphere is responsibility of CADE’s Tribunal, which may apply to the investigated companies, fines up to 20% of theirs incomes. The individuals, if identified and condemned, may pay fines from BRL 50 thousand to BRL 2 billion. The Tribunal may as well adopt other measures if it understands necessary to the deterrence of the conduct.

Leniency Agreements at CADE

This is the third leniency agreement signed by CADE, in the context of the “Car Wash Operation”. The first one was signed in March 2015, by the company Setal/SOG and some of its employees and former employees, with the intervention of the Federal Prosecution Office at the State of Paraná - “Car Wash Task Force”, concerning a cartel investigation in the context of onshore industrial assembly of Petrobras. The second leniency agreement was signed in July 2015 by the company Construções e Comércio Camargo Corrêa and some of its employees and former employees, with the intervention of the Federal Prosecution Office at the State of Paraná - “Car Wash Task Force”, concerning to the cartel investigation in the context of the Eletronuclear’s assembly works in the Angra 3 power plant of Eletrobras Termonuclear S/A – Eletronuclear.

According to the Law No 12.529/2015 (Brazilian Competition Law), the leniency agreement has the purpose of obtaining information and documents that prove the cartel conduct, as well as to identifying other participants involved in the conduct. The agreement could be signed in cases when, in the occasion of its proposition, CADE does not have enough evidence to ensure the condemnation of the involved parties.

The leniency agreement is only signed with the first applicant company (or its economic group), which has to cease its involvement in the conduct, confess the illegal practice and cooperate fully and permanently with the investigations, by identifying the others involved and submitting evidence and relevant information. The leniency benefit the signatories with the dismissal or the reduction of one to two-thirds of the penalty in the proceeding conducted by CADE. The agreement is signed together with the Federal Prosecution Office and it benefits the signatory with full or partial criminal immunity.

The leniency agreement is an instrument used by antitrust authorities in several countries to unravel cartels. Since 2003, more than 50 leniency agreements have been signed at CADE.