Report

‘Lula Is Supporting Corrupt Companies to Do Corrupt Business Abroad’

An influence-peddling investigation into Brazil’s former president is the rare time an ex-leader faces charges for his business dealings after leaving office.

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When federal prosecutors in Brazil launched a criminal probe into whether Luiz Inácio Lula da Silva has been involved in influence peddling on behalf of the country’s largest construction firm, they took the comparatively rare step of investigating a past president’s current business dealings — not any wrongdoing he may have committed while still in office.

While plenty of former presidents and prime ministers have been investigated after leaving their posts, it is their actions while in office that normally face scrutiny. Panama’s justice department, for example, currently has multiple probes into allegations that Ricardo Martinelli, who left the presidency in 2014, embezzled public money and wiretapped political opponents. Former French President Nicolas Sarkozy faced an investigation over corruption and influence peddling in 2014. Even Bill Clinton faced a post-presidential investigation: Whitewater independent counsel Robert Ray didn’t finish what has predecessor, Kenneth Starr, had finished until 2006.

But once they’re out of office, investigators tend to turn a blind eye to the business dealings of former leaders, even though many become international wheeler-dealers cashing in on their status and stature to earn millions, and sometimes tens of millions, of dollars. While in government, leaders’ official acts are scrutinized by political opponents, the press, and, occasionally, prosecutors. Although they trade on their public service, the private affairs of those who have left public office draw far less interest.

“There is apparently a general expectation among such elites around the world that when they leave office it becomes time to cash in,” said Michael Johnston, a professor of political science at Colgate University and an advisor to international organizations on corruption. “And for some reason we are accepting of that.”

Brazilian prosecutors are examining the role that da Silva played in securing billion-dollar contracts for Odebrecht, a giant construction firm, in Cuba, Panama, Venezuela, Ghana, and other countries. In addition to da Silva’s traveling to the countries to secure the deals, the prosecutors believe that the former president used his influence to press the Brazilian Development Bank, a government-owned institution that supports projects in the country and abroad, to finance the deals. Through his think tank, Instituto Lula, da Silva has denied any wrongdoing.

Odebrecht, the main player in Brazil’s construction cartel, has faced accusations of human trafficking, bribery, and corruption. The BBC reported that a prosecutor charged the company in June 2014 over its treatment of 500 workers — described as “modern slaves” in the complaint — at a project in Angola. Authorities arrested CEO Marcelo Odebrecht for masterminding the $2.1 billion Petrobras scandal, in which officials at the state oil company exchanged inflated construction contracts for bribes.

The scandal has also implicated members of Brazil’s legislature and has led to calls for the resignation of President Dilma Rousseff. As for her mentor, “Lula is supporting corrupt companies to do corrupt business abroad,” said Alejandro Salas, regional director for the Americas at Transparency International’s secretariat in Berlin.

Even more notable is the focus on the ex-presidential activities of a former leader. Transparency International and corruption experts consulted by Foreign Policy all agreed that while ex-presidents and former prime ministers have sometimes faced scrutiny over official acts after leaving office, their private affairs — often incredibly lucrative — generally remain free from official scrutiny.

The list of leaders who have gone on to financial success after leaving office include former German Chancellor Gerhard Schröder, who made a mint after Gazprom, the Russian energy giant, appointed him to the board of pipeline firm Nord Stream, whose projects Schröder had championed while in office; former Canadian Prime Minister Jean Chrétien, who has had closed-door meetings with Russian President Vladimir Putin in Moscow while working for Dentons, an international law firm with a thriving practice in Russia; and former U.S. President Bill Clinton, who solicited foreign donations for his foundation and six-figure speaker fees while his wife, Hillary Clinton, was a U.S. senator, a presidential candidate, the secretary of state, and now the front-runner for the Democratic presidential nomination.

“If the U.S. government is not going to investigate that, when it looks like such an incredible conflict of interest, then what will it investigate?” asked Joseph DiGenova, a former independent counsel who investigated allegations that George H.W. Bush’s administration improperly accessed the passport records of Bill Clinton ahead of the 1992 election.

Tony Blair, the former British prime minister, conducts his post-government career through a network of eight corporate entities, a structure that allows for limited disclosure of the income they earn. As Vanity Fair reported, while JPMorgan Chase was an early and significant client, Blair took business from governments, emirs, and investment funds from the United Arab Emirates, Kuwait, and Qatar, all while he served as the representative of the Quartet, the body of policymakers charged with seeking solutions to the Israeli-Palestinian conflict. He resigned that position only in 2015, but continues to represent his Persian Gulf state clients. Neither Blair’s complex business arrangements nor the business they do led to an official inquiry.

This makes the investigation of da Silva all the more unique. In part, that’s because of the scope of the scandal and its emotional impact. “Petrobras is not only the biggest company in the country; it’s a symbol — it’s almost like the football team,” Salas told FP. In addition to the symbolism, the steady stream of revelations has also played a role in the expanding number of targets in the probe. “The fact that prosecutors have moved with such autonomy and speed — they are being very brave; they’ve touched some of the most powerful interests in the country, including the construction cartel — has proven extremely important,” said Salas.

“The Petrobras investigation is a great break for Brazil, and indeed they should try to make the most out of it,” said Alina Mungiu-Pippidi, director of the European Research Centre for Anti-Corruption and State-Building at the Hertie School of Governance in Berlin. “Brazil has been edging towards better governance in the last years, [and] it may be that this shake-up of politics is what they really missed to move to a new governance era.”

Johnston agrees that the prosecution has developed a momentum all its own. “The Brazilians I’ve worked with at various international gatherings have left me with a sense that there’s a kind of now-or-never logic with Petrobras having opened the door to lots of investigations,” he said.

“Lula’s outsized reputation makes him a tempting target,” he added.

Image credit: Getty Images

Bill Allison is a senior staff writer at Foreign Policy. @bill_allison

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