The Plot Thickens In Petrobras Corruption Scandal

The rags-to-riches life story of Maria das Gracas Silva Foster has taken a sharp turn with her resignation as CEO of Petroleo Brasiliero SA (Petrobras), along with five other senior executives, in a long-simmering corruption scandal involving kickbacks and bribery that has cost the company billions of dollars.

In a securities filing on Feb. 4, Brazil’s semi-public international energy company based in Rio de Janeiro said the resignation of Foster would be effective immediately and that the company’s board of directors would meet Feb. 6 to find replacements.

There was no mention of whether the other five executives also would leave immediately or stay until a new CEO is named, and no word who might replace Foster.

Related: Corruption Scandal Threatens Brazilian Oil Developments

Foster, from a poor family in a “favela,” or slum, of Rio, recycled metal cans to pay for her education and has spent her entire professional career with Petrobras. In the late 1970s, while still in college, she became an intern at the oil company and rose quickly through the ranks from 2003-2010, when Dilma Rousseff was chairwoman of Petrobras’ board of directors.

Foster and Rousseff became friends, and in 2011 Rousseff became president of Brazil. The next year, Foster was named the first female chief executive Petrobras.

Within a year, however, suspicions arose of corruption at Petrobras, the largest publicly traded oil company in Latin America, doing severe damage to its financial standing. In response, Foster says, she repeatedly told Rousseff that she was prepared to resign, but Rousseff urged her to stay on.

Meanwhile, the company’s shares plunged to their lowest level in 10 years because of the suspicions of corruption and helped by the worldwide drop in oil prices, but immediately began rebounding on Feb. 3 on word that Foster’s resignation was imminent.

Ever since the first suspicions arose, Rousseff was under great pressure to rid Petrobras of even the hint of corruption, especially after three former senior executives of the company and dozens of others who did business with Petrobras were arrested and testified about the corrupt activity.

Brazilian investigators say the suspected corruption involves bribery, price-fixing and kickbacks to politicians and political parties, including Rousseffs Workers’ Party. So far, police say, the scheme siphoned at least $3.7 billion and maybe more than $28 billion from Petrobras’ treasury.

Related: Oil Majors’ Profits Take A Beating

Petrobras itself reported last week that the financial wrongdoing contributed to a loss of $22.7 billion from the value of assets including offshore oil rigs and refineries.

Brazilian federal prosecutors say 86 people so far are suspected of criminal wrongdoing. Even the United States has gotten involved in the probe, with the US Securities and Exchange Commission and the Justice Department investigating because Petrobras shares are traded on the New York Stock Exchange.

Reuters, citing two anonymous sources, reports that Rousseff has asked her finance minister, Joaquim Levy, to help the company develop new accounting practices to help sort out its finances. Levy, who joined Rousseff’s cabinet only last month, is also searching for candidates to make up a new board of directors for Petrobras, according to one of the Reuters sources.

By Andy Tully of Oilprice.com

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