Brazilian police probe nuclear submarine program: Folha

SAO PAULO (Reuters) - Brazilian federal police are investigating potential irregularities in a military program that aims to build a nuclear-powered submarine in partnership with France by 2023, newspaper Folha de S. Paulo reported on Wednesday.

An Odebrecht placard is pictured in front of a construction site in Rio de Janeiro, Brazil, June 19, 2015. . REUTERS/Pilar Olivares

Folha said police searched for documents that could prove their suspicions of fraud in the program. The search was part of a wider probe that led to the arrests on Tuesday of two executives involved in building a nuclear power plant for state-run utility Eletrobras.

Federal police did not respond to a request for comment and the newspaper did not say how it had obtained the information.

Former President Luiz Inacio da Silva’s government agreed in 2008 to purchase five submarines, including a nuclear-powered one, from France for 6.7 billion euros. The submarines were to be made by French shipbuilder DCNS in a joint venture with Brazilian engineering and construction conglomerate Odebrecht SA at a Navy base on Sepetiba Bay, south of Rio de Janeiro.

Folha said there was no competitive tender process when DCNS subcontracted part of the work on the submarines to Odebrecht. The Brazilian company’s chief executive and other senior executives were indicted this month on corruption charges for alleged fraud on contracts with state-run oil firm Petrobras.

The newspaper did not say that state-backed DCNS, which is 35 percent owned by French defense group Thales, was being investigated. It added that the submarine investigation could prove difficult to carry out because it involved a matter of national security.

A DCNS spokesman had no immediate comment.

Odebrecht said in a statement it did not have knowledge of any search or seizures related to the submarine development program and that only Brazil’s Navy could release information about the program.

Tuesday’s police operation focused on Eletrobras’ Eletronuclear division, which is building a nuclear power reactor near Rio de Janeiro, expanding a corruption scandal previously focused on Petrobras.

Police carried out raids at five engineering firms that belong to the consortium building the Angra 3 reactor, including Odebrecht.

The investigation that began in March 2014 has led to jail for some of Brazil’s most senior engineering executives and caused Petroleo Brasileiro SA, as Petrobras is formally known, to write off more than $2 billion in corruption-related losses.

Dozens of lawmakers, mostly from President Dilma Rousseff’s governing coalition, have also been implicated for allegedly taking bribes in the kickback scheme, which has spiraled into Brazil’s largest corruption scandal.

Reporting by Caroline Stauffer; Editing by Paul Simao and Bill Rigby