| SAO PAULO
SAO PAULO Oct 7 A commission hired by Brazil's
state-run energy utility Eletrobras to probe possible
violations of U.S. and Brazilian anti-corruption laws involving
the company is studying three Amazonian dam projects and a
nuclear power plant, two sources familiar with the investigation
They said the commission is investigating possible bribery
in two $5 billion dam projects on the Madeira river, Santo
Antonio and Jirau, as well as the massive Belo Monte dam and the
Angra 3 nuclear power plant that prosecutors have already linked
to a huge corruption scandal.
Both sources said the investigation is at an early stage but
that the commission is looking at everything from how
construction contracts on the projects were awarded to heavy
cost overruns. Eletrobras owns Angra 3 through its Eletronuclear
subsidiary and has a stake in the three dams under review.
One of the sources said the commission is sharing its
information with the U.S. Department of Justice and the U.S.
Securities and Exchange Commission.
Both the SEC and DOJ declined to comment when asked if they
were investigating Eletrobras. Eletrobras said it would only
comment on the commission's probe when it was concluded.
Brazilian federal prosecutors say construction firms
involved in Brazil's largest-ever corruption scandal at state
oil company Petrobras likely repeated a price fixing and
political kickback scheme at Eletrobras, a smaller state-run
firm that employs some of the same contractors as the oil giant.
Any discovery of corruption could force a balance sheet
write-off and delay completion of the dams, preventing them from
reaching their full capacities at a time Brazil's energy grid is
recovering from drought.
Eletrobras, formally known as Centrais Eletricas Brasileiras
SA, hired U.S.-based law firm Hogan Lovells in June to assess
possible graft involving Eletrobras and private construction
firms but did not say which projects were being checked.
It later appointed Brazilian firms WFaria Advogados and R.
Amaral to evaluate any violations of Brazilian law, as well as
three independent commissioners, the sources said.
The commission aims to complete its review this year and may
recommend a write-off, one source said. Petrobras wrote off $2
billion in graft losses in April.
Brazil's Federal Accounts Court, the TCU, says it is also
concerned about possible corruption on Eletrobras dam projects
in which private contractors under investigation have a stake or
were hired to do work.
The dams have less oversight than the Petrobras contracts
and their projected construction costs have more than doubled,
according to TCU investigator Sergio Caribe, who is leading a
review initially focused on Belo Monte.
"Over-pricing is an indication that something is not right,"
he said in an interview.
Representatives for Santo Antonio operating consortium Santo
Antonio Energia and the Belo Monte operating consortium Norte
Energia said they had not been informed of any irregularities
found by the commission.
The consortium operating Jirau, Energia Sustentavel do
Brasil (ESBR), attributed the rising costs to inflation, an
expansion of the project and damages from two fires. It said the
dam should not have been included in Eletrobras' internal
Santo Antonio Energia said its additional investments were
all normal and had been approved by shareholders.
Petroleo Brasileiro SA, as Petrobras is formally known, has
been investigated by the SEC and the U.S. Department of Justice
since last year.
Both Petrobras and Eletrobras have shares on the New York
Stock Exchange and are subject to the U.S. Foreign Corrupt
Practices Act, which aims to prevent graft by companies linked
to the United States.
Brazilian prosecutors this month charged Othon Luiz Pinheiro
da Silva, the chief executive of Eletronuclear, with corruption
and money laundering. He is accused of taking 4.5 million reais
($1.1 million) in bribes related to the Angra 3 plant near Rio
The Santo Antonio dam, Brazil's fourth largest, includes
participation from Eletrobras subsidiary Furnas, Caixa FIP
Amazonia Energia, SAAG Investimentos and Cemig Geração e
Odebrecht Energia, part of Latin America's largest
engineering group Odebrecht SA, has an 18.6 percent stake in
Santo Antonio and was also hired to build it. Odebrecht declined
Jirau is a venture by France's Engie SA, formerly
known as GDF Suez, as well as Japan's Mitsui & Co, and
Eletrobras subsidiaries Eletrosul and CHESF. The other
stakeholders referred questions to the ESBR consortium.
Camargo Correa had an operating stake in Jirau and was
building it, though it sold its shares to GDF Suez in 2012 and
is no longer involved. ESBR said dozens of construction
companies have been hired.
Camargo Correa did not respond to request for comment.
($1 = 4 reais)
See graphic on Petrobras and Eletrobras corruption scheme reut.rs/1GQrMVf
(Additional reporting by Mica Rosenberg in New York, Anthony
Boadle in Brasilia, Sarah Lynch and Joel Schectman in
Washington; Editing by Kieran Murray)