Reuters International

By Anthony Boadle

BRASILIA (Reuters) - Negotiations on leniency deals between the Brazilian government and 12 companies blacklisted in the Petrobras corruption scandal have been put on hold until prosecutors conclude plea bargains with executives, Brazil's anti-corruption minister told Reuters.

Transparency Minister Torquato Jardim said he was keen to get the construction firms back to work on government contracts once they have paid fines, but prosecutors must first conclude Brazil's biggest corruption investigation.

The blacklisted companies employ 90,000 engineers and technical staff, and have contracts with hundreds of suppliers. The government wants to lift the freezes as they have put tens of thousands of people out of work and hit gross domestic product during Brazil's worst recession since the 1930s.

The Operation Car Wash probe into political kickbacks at state oil company Petroleo Brasileiro SA, as Petrobras is formally known, is being led by a taskforce from the southern city of Curitiba.

It has led to the arrest of dozens of politicians and executives at some of Brazil's biggest construction firms, including Latin America's largest engineering conglomerate Odebrecht, which is reportedly negotiating a plea bargain.

Jardim's ministry, formerly known as the Comptroller General's office, must decide whether the companies should be barred from bidding for public works for up to five years.

Firms can be taken off the blacklist if they admit guilt, provide investigators with information and repay graft money.

"The prosecutors asked us to put our leniency agreements on hold so they would not interfere with their negotiations with the companies," Jardim said in an interview on Tuesday. "The priority is to wrap up Operation Car Wash first."

So far, three engineering firms have been banned for at least two years after the government rejected their leniency requests. Those companies are Mendes Junior, IESA Oil & Gas [IEOG.UL] and the Brazilian unit of Swedish construction company Skanska AB, the world's No. 5 construction firm.

Skanska has challenged the government's decision.

Jardim said he decided to reject a fourth company's request for leniency because it was not cooperating, while two others have provided new documents. He declined to name the companies.

Jardim said there was no expected date for the Curitiba taskforce to wrap up its two-year investigation that landed dozens of executives in jail or court and shaken the country's political establishment.

Newspaper Valor Economico reported that the Odebrecht group is close to reaching a plea deal with prosecutors that includes a fine of 7 billion reais ($2.2 billion).

That agreement is expected to provide investigators with some of the most revealing testimony yet about the vast corruption scheme, which police said could implicate as many as 200 politicians thought to have received kickbacks from Odebrecht, including members of President Michel Temer's party.

Temer's government will not interfere with the corruption investigation, Jardim said, even though there is concern that Brazil's top construction and engineering companies remain blacklisted at a time when the economy desperately needs them.

"There will be no amnesty, no forgiveness, and they will all have to pay the fines established by law," Jardim said. "But the companies must be reinserted in the market for their technical expertise and the people they employ."

The only leniency deal reached to date to avoid prosecution for corruption related to contracts with Petrobras was a $328.2 million settlement with Dutch oil-ship leaser SBM Offshore NV, but a federal prosecutor review board rejected it.

Jardim said the board's ruling was wrong and he expects approval will come eventually.

That will allow Brazil to collect an additional $100 million from the settlement paid by SBM in the Netherlands, as allowed under the OECD anti-corruption treaty because the alleged bribery took place in Brazil, he said.

(Reporting by Anthony Boadle; Editing by Daniel Flynn and Andrew Hay)


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