Involvement of Braskem in the Petrobras corruption scandal

Braskem’s name has come up in the corruption probe surrounding Petrobras. Braskem is accused of bribing Petrobras officials to secure construction contracts between 2006 to 2012

Bloomberg reported, Braskem SA –the biggest petrochemical company because of revenues is the new victim of the corruption scandal that has surrounded Petroleo Brasileiro Petrobras.

The petrochemical giant got stuck in the corruption scandal after a witness claimed that the company made under the table payments to Brazilian oil company in order to get contracts. As per the evidence given by Paul Roberto Costa –former executive of the company and confessions by Alberto Youssef who were involved in money laundering Braskem used to make a payment of $5 million between the year 2006 and 2012. These bribes were given to acquire crude oil prices derivatives like naphtha and propylene at lesser price. The evidence was made public on the website of Brazilian Supreme Court earlier in March.

Naphtha is the main element for making petrochemicals, and contains almost 50% of the whole production cost. Moreover, around 70% of naphtha demand for naphtha is provided by Petrobras.

The appeal by Mr. Youssef and Mr. Costa does not allow their lawyers to say any anything related to the bribery and corruption scandal that happened in one of the biggest energy company of the world.

Braskem rejected the claims, its $750 million worth of bonds carrying a 7% coupon rate with a time period of 5 years dropped by 9.6% and traded at $0.97 last week.

After the fragile performance of bonds, the petrochemical giant informed their bond holders via Bloomberg that the company still has around $1.8 billion worth of cash available beside other facility of credit line, which is enough to safeguard its debt commitments for nearly 2 years.

The company disclosed that its growth is linked with dollar, which is strengthening against the home currency.

The entitlement against Braskem shows the penetration level due to the scandal. The interrogation took place has knotted the rig makers, Brazilian builders and officials of government. Moreover, it has also caused 1 million protestors to come out against Dilma Rousseff’s way of handling the issue.

These kinds of claims can seriously hurt the petrochemical company’s stock price, as shareholders might prefer to sell their ownership instead of holding it due to the ongoing investigation. In such situation, shareholders overlook the sufficient financial position of the company.

While talking about the current development Petroleo Brasileiro Petrobras said, “All the payments and contracts between Braskem and Petrobras followed the legal requirements and were approved in a transparent manner in accordance with the governance rules of both companies

Mr. Barusco, former official of Petrobras accept taking bribes

On Tuesday, during hearing Ex-official of Petroleo Brasileiro Petrobras Mr. Pedro Barusco accepted that he took bribes. He told that he took around $100 billion worth of bribes and the present ruling party has taken almost twice as more as the corruption scandal.

In 2014, the Brazilian company was accused of raising the true contract value with a lobby of construction companies, using the amount to bribe ex-officials of the company and some local politicians. According to ABC News, the federal court accused that around $800 million worth of amount was used in the scandal to bribe the involved members.

During the hearing, Mr. Barusco spoke openly about the corruption scandal. According to WSJ report, he pointed out that he took his first bribe in the year 1997 and then in 1998, but the set of the practice became institutionalized and prevalent in 2003-04.Dilma Rousseff, President of Brail who was the chairperson of Petrobras from a time span of 7 years from 2003 to 2010 said he did not have knowledge regarding the scandal in his tenure.

As told by WSJ, Mr. Barusco exposed that he consistently met Workers Party treasurer in hotel rooms to talk about the bribes share. According to him almost $150 to $200 million was given to ruling party executives on the basis of contract percentage taken by Mr. Neto.

Earlier last month Mr. Neto was accused of involved in the scandal. An investigation had been started against him and the court put an allegation on Mr. Neto to have taken almost $150 million to $200 million altogether from ninety contracts Petrobras signed with the construction companies. The legal representative of Mr. Neto discarded the claim.

Reuters reported, Mr. Barusco stated, “I got a piece; they got a piece.” He also mentioned that he has made a deal among the state prosecutors of giving back $97 million. Furthermore, he deprive off having any information about how the practice initiated and thinks that Maia Gracas a former Chief Executive Officer is not guilty.

After all these , the current ruling party still deprived of any kind of misconduct, arguing that Barusco did not have any proof against them. They said the part only received donations and they will file a lawsuit against Mr. Barusco

The Brazilian energy giant claims to be a victim of the corruption scandal. Petrobras together with the economy of Brazil has been hurt badly due to the scandal. Company’s stock has tumbled by approximately 83%.