Dive Brief:
- Brazilian authorities have alleged that at least five of the country’s biggest construction companies conspired to exaggerate costs and overbill for work on taxpayer-funded soccer stadium projects for the 2014 World Cup, according to The Wall Street Journal.
- One contractor, Andrade Gutierrez Engenharia SA, gave CADE, the country’s antitrust agency, evidence — including emails and meeting records — that the "cartel" engaged in bid-rigging for up to eight of the 12 stadiums utilized during the biggest soccer event in the world.
- CADE said the firms met soon after FIFA (Federation Internationale de Football Association) awarded Brazil the tournament to predetermine bid prices and divide projects between themselves.
Dive Insight:
Authorities entered into a leniency agreement — somewhat similar to a plea bargain — with at least one of the companies under investigation, Construções e Comércio Camargo Corrêa SA, in return for its cooperation.
Another construction company accused of participating in the "anticompetitive agreement" is Odebrecht Investimentos em Infraestrutura Ltda, the largest construction company in Latin America. Coincidentally, just last week a group of Odebrecht’s upper management pleaded guilty in another construction-related corruption scandal known as "Car Wash," a $2 billion bribery and embezzlement scheme against Petrobras, the state oil company.
Earlier this year, former CEO Marcelo Odebrecht was sentenced to 19 years in prison on money laundering, organized crime and corruption charges, as prosecutors claimed that, as possibly as early as 2006, Odebrecht and other companies bribed Petrobras executives in return for contracts
Although not on the scale of these two cases, fraudulent construction schemes pop up frequently in the U.S. as well, many of them related to minority hiring requirements. One of the most recent cases is that of Illinois contractor Michelle Cho, who pleaded guilty to wire fraud charges after supposedly allowing another company to use her firm as a disadvantaged "straw man."
According to a 2015 Kroll Global Fraud Report, 75% of construction, engineering and infrastructure companies experienced a fraud incident last year. The industry has the second-highest fraud rate of any sector, behind retail.
