Brazilian oil company Petrobras says it lost $2.1 billion to kickback scheme since 2004

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RIO DE JANEIRO — Brazil's state-run oil company Petrobras said Wednesday that it lost $2.1 billion in an eight-year kickback scheme that saw the firm's executives taking bribes for awarding inflated contracts to suppliers.

The company released its long-delayed fourth quarter financial results that included a write down of 6.2 billion reais — about $2.1 billion at the current conversion rate to the U.S. dollar. It attributed the losses to a series of inflated contracts and other graft during the scheme it says ran from 2004 to 2012.

Releasing the audited results was the first step for Petrobras to try to regain investor confidence and access to international credit markets, which the debt-plagued company desperately needs to develop huge offshore oil fields discovered in recent years. The company was cut to junk status by Moody's Investors Service in late February in large part because of the scandal.

The U.S.-based Eurasia Group said in a research note after the Petrobras results were published that "attention will now shift to measures that will bolster the company's course correction in the longer-term."

"Since earlier this year, a set of more favorable policies and measures have been taking shape, beginning with a change in the company's leadership, and the decision to overhaul the company's board of advisers by removing political appointees and replacing them with more business-friendly names," the note said.

Rio de Janeiro-based energy consultant Evan Sponagle said releasing the audited results would give banks "a reason to start lending again" to not just Petrobras but to Brazil's entire oil industry, which has been frozen under the cloud of the corruption investigation.

Federal prosecutors say the probe has uncovered the largest graft scheme ever uncovered in Brazil. They also stress that they are still investigating and the case is widening, with dozens of top business executives along with federal congressmen and other political figures facing charges, under investigation or already sitting in jail.

Investigators say the scheme saw Brazil's top construction and engineering companies pay bribes to a handful of Petrobras' politically appointed executives in return for winning inflated contracts. Prosecutors allege some of the money then flowed into the campaign coffers of the governing Workers' Party and its allies, which they deny.

In addition to the dozens of executives who have been charged in the case, the Attorney General's Office last month said it was investigating over 50 political figures, including 21 federal deputies and 12 congressmen, for alleged participation in the graft. Included among those under investigation are the leaders of both houses of congress.

So far, President Dilma Rousseff, who was chairwoman of the Petrobras board during most of the years the scheme played out, has not been implicated in the case. She has expressed strong support for the investigation and for holding the guilty accountable.

But the investigation creeped closer to Rousseff following the arrest earlier this month of her Workers' Party treasurer, Joao Vaccari, who is charged with money laundering for allegedly taking in money connected to the Petrobras kickback scheme.

On Wednesday, a federal judge handed down sentences to two of the main figures in the case, giving former Petrobras executive Paulo Roberto Costa over seven years in prison and the scheme's top money bagman, Alberto Yousseff, over nine years. Both can appeal the ruling or have their sentences reduced if they continue cooperating with investigators as they ha've been doing for months.


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