Corruption in Brazil: Mensalao

Corruption in Brazil: Mensalao

Seven years ago, Roberto Jefferson, then-president of the Brazilian Labour Party (PTB), told a journalist that the treasurer of the ruling Worker’s Party (PT) had been making monthly payments of over R$30,000 ($18,000) to members of Brazil’s Congress. These payments, he said, were made to secure their support for the federal government’s programmes. Jefferson’s revelations touched off the Mensalão scandal, named after the participants’ nickname for the monthly payments. The scandal recently reached its resolution in November 2012, with the conviction and sentencing to prison of a score of legislators, political party officials and businessmen. The Mensalão rulings, handed down by Brazil’s Supreme Court, are a milestone in a country where politicians charged with white collar crimes are generally able to avoid jail and sometimes even continue to hold public office. Indeed, Paulo Sotero of the Woodrow Wilson Center went so far as to call Brazil ‘a paradise of impunity for white collar crime’ in a recent Financial Times article. The most cited example of this impunity is Paulo Maluf, an ex-mayor of São Paulo. Maluf continues to play a leading role in the city’s politics despite multiple corruption allegations, an Interpol arrest warrant, and a recent corruption conviction in a  court in the Channel island of Jersey. Fresh corruption scandals are in steady supply. A senator from the Brazilian state of Goiás’ relationship with an illegal gambling magnate was recently investigated. In December 2012, a former aide to the former president Luiz Inácio (‘Lula’) da Silva was charged for her alleged involvement in a bribery ring. Nevertheless, the scale and complexity of the Mensalão sets it apart. The scheme involved tens of millions of reais, and the court case concerned 38 defendants.  From the beginning, it was closely followed by the Brazilian press, and media retrospectives on the scandal reveal that the early days were not without an element of farce. Jefferson testified before Congress in 2005 sporting a black eye, apparently from a freak accident with a wardrobe. An early Congressional ruling provoked dancing on the floor of the Chamber of Deputies. The trial itself has been comparatively staid, yet even more closely followed. It was broadcast live on television and the internet, and the most prominent judges, particularly the chief justice Joaquim Barbosa, have become household names in Brazil. Much of the public discussion of the case concerned Lula, then-president of Brazil and founding member of the PT. Lula told the nation in a televised address that he felt ‘betrayed’ by the perpetrators of the Mensalão, insisting that he had never known of the scheme. However, in the interview that ignited the scandal, Jefferson described Lula weeping upon hearing of it months before. Nevertheless, Lula was not directly implicated, and despite his party’s involvement, he won a second term in 2006. Because of the heightened media coverage of the Mensalão, the judiciary felt that the handling of the case represented a kind of ‘test for the system’, according to one academic and expert on transparency issues we spoke to. Six years after Brazil’s attorney general brought the case to the court, the system seems to have worked. In November 2012, the Supreme Court convicted 25 defendants on charges of bribery, embezzlement, money laundering, tax evasion, fraudulent management and conspiracy. Those convicted include Lula’s former chief of staff José Dirceu, who is thought to have masterminded the scheme: he was sentenced to over 10 years in jail. The Mensalão prosecutions and convictions have caused some commentators to hail the ruling as a turning point for the corruption landscape in Brazil. It has occurred in the wake of similar lower-profile developments in the last few years. For example, in June 2010, civil groups persuaded Congress to pass the Ficha Limpa [Clean Record] law. This law bars individuals who have been convicted of a crime from running for office for eight years after they have served their sentence. In 2011, several ministers in the newly-formed Rousseff administration resigned after the press reported on their alleged involvement in bribery and influence peddling. In the autumn of that year, thousands marched against corruption in Brasília, Brazil's capital city, on the country’s Independence Day. The government has instituted a number of anti-corruption programs such as a freedom of information law and the publishing of federal government expenditures. Furthermore, Congress is considering a new anti-corruption law, though progress on the bill has stalled. A government relations analyst we spoke to also sees a glimmer of hope in the ruling, saying, ‘I think the Mensalão ruling is a stepping stone, although my colleagues don’t agree.’ Are these then the first shoots of robust anti-corruption enforcement in Brazil? Perhaps. But it is possible to overestimate the significance of the ruling. While attitudes toward corruption may be changing, the institutional structures that allow corruption politicians to escape punishment remain in place. Brazil’s justice system moves so slowly that defendants with skilled lawyers can escape judgment by running out the clock on the statute of limitations. Furthermore, government officials of a certain level must be tried in the Supreme Court, which does not have the resources to hear all the cases that come to it in a reasonable amount of time. Public pressure may have pushed the court to act on the Mensalão, but it is not clear that this will be the case for less publicised offences. Furthermore, Congress may attempt to stall the Mensalão ruling’s implementation by voting to allow the three legislators that have been convicted to continue in their seats. The Supreme Court ordered their dismissal in December 2012, but Congressional leaders have insisted that only Congress can dismiss congressmen and have warned of an institutional crisis. Although the court system and legislative framework may take some time to catch up with popular anti-corruption sentiment, the reputational effect of prosecutions such as the Mensalão may be more potent. A director at a university program on the US and Brazilian legal systems points out that ‘25 were condemned, but 35 had their reputation damaged. The new generation of politicians will think twice before doing anything wrong.’ That said, if after thinking twice, they decide to proceed, they will most likely be more careful about covering their tracks. As one local corruption expert told us, ‘In the short-term, corruption will become better managed and less obvious.’ This heightened care will most likely make the lives of law enforcement bodies, and even due diligence firms, more difficult. Nevertheless, there does seem to be room for cautious optimism. A professor and transparency expert at a Brazilian university makes the point that Brazil’s present is not so different from the history of now more transparent countries, saying ‘The US and Great Britain were very corrupt in the 19th century, and they evolved slowly and came up with institutions. For example, public servants in the US in the 19th century were chosen by political hacks, and there was a lot of corruption. The Pendleton Act [an 1883 US law stipulating that government jobs must be granted according to merit] changed that. Brazil has done a lot of the things it should …. It is well on its way, and this is the first salvo.’ Brazil certainly seems to be moving in the right direction, but there is no guarantee that it will reach the destination of consistent and robust anti-corruption enforcement anytime soon. In the words of one leading Brazilian anti-corruption lawyer, ‘Mensalão has made a difference, but real change will take a generation.’ By Funmi Ojo Associate, Business Intelligence, Washington DC  
Published: 19th December 2012