Rio Mayor Named in Connection to Ongoing Corruption Case

(ATR) New allegations say Eduardo Paes received more than $8 million in undeclared campaign contributions.

(ATR) Rio de Janeiro outgoing Mayor Eduardo Paes is one of the latest politicians named in connection to the Lava Jato corruption scheme.

Paes’ name was mentioned by executives of the Brazilian construction company Odebrecht as part of a plea agreement. Odebrecht is one of the largest construction companies in Latin America, and is deeply embroiled in the Lava Jato scandal.

Executives of the company are currently cooperating with Brazilian authorities to detail corrupt practices in conjunction with politicians and state oil company Petrobras. The scheme, which continues to be investigated, has consumed much of Brazil’s political class and has seen over $2 billion in bribes and kickbacks uncovered. The kickbacks were centered in contracts awarded to construction companies for Petrobras projects through politicians as intermediaries. Further investigations have shown a vast expansion of the scheme reaching all areas of Brazil.

Mauricio Santoro, a political scientist from the State University of Rio de Janeiro, toldAround the Ringsthe accusations against Paes are "very serious."

Brazilian reports say Odebrecht director of infrastructure, Leandro Andrade Azevedo, gave Paes as much as $8.95 million as part of his reelection campaign in 2012. Azevedo says he dealt with Paes’ second in command Pedro Paulo and delivered undeclared election contributions. According to the executive, some of the money was transferred to advertising agency Prole, in addition to other offshore accounts.

"The purpose of the payments made, as detailed in the initial topic of this report, was to keep the company's privileged access to Paes' agenda, allowing us to deal directly with him, without any red tape or any difficulty, on payment delays or any problem in the execution of our contracts," Azevedo was quoted as saying by Brazilian outlet Veja.

This is the second blow for Paes as he completes his final weeks in office. Last week, Paes had his assets frozen by a Brazilian judge over alleged financial impropriety regarding the Olympic golf course.

The court ruled that Paes had not charged developers of the course the appropriate environmental taxes. In addition, the ruling stated it was appropriate to freeze Paes’ assets, given that he will be travelling to the United States in 2017 to take up a visiting professorship at Columbia University.

Paes’ office has not responded to the Odebrecht charges but said in a statement it would be appealing the decision regarding the golf course. The statement said Paes "repudiates the insinuation" that the upcoming Columbia residency would interfere in the day to day work of being Rio’s mayor.

"Unlike the Public Prosecutor's office, Rio's City Hall demanded, in the environmental licensing process of the Golf Course, that [the golf course developers] pay the fee for the authorization of suppression of exotic vegetation," the statement said. "On Nov. 9, one month before the lawsuit filed, the Environment Department had already sent a letter to the Attorney General's Office requesting the collection of updated amounts plus interest for late payment via active debt."

Throughout the process Paes was in charge of negotiating Olympic contracts on behalf of the city of Rio. The contracts were negotiated after the city assumed control of responsibilities from the Brazilian Federal Government. The latest allegations do not mention construction contracts for the Games explicitly, although according to local media reports inquiries into Odebrecht Olympic contracts remain ongoing.

The IOC was not involved in the construction tender negotiations but expressed support for Paes during preparations. Paes routinely told the media that the city of Rio negotiated construction deals through clean practices. Last December, the IOC Rio 2016 Coordination Commission said that it believed an audit of Rio Olympic contracts was "not necessary."

An IOC spokesperson told ATR"these are serious allegations," against Paes.

"However, as there is a legal process currently under way it would be inappropriate for us to comment at this stage," the spokesperson added.

Paes said on Dec. 15 he would no longer be taking up his Columbia University residency in 2017. The University confirmed the decision, but would not say if Paes plans to take the residency at a future date.

Santoro told ATRthat the new allegations could tarnish the legacy of the Rio Games. He added that the revelations signal to the Brazilian public that "mega sporting events such as the World Cup and the Olympics were used as business desks for corruption, benefiting large contractors and politicians."

Last month, former Rio State Governor Sergio Cabral was arrested on corruption charges. Cabral was accused of taking bribes from construction companies in return for favorable contracts. One of the contracts under investigation involved the renovation of the Maracana stadium ahead of the 2014 FIFA World Cup and 2016 Olympic Games.

Cabral was one of the Brazilian leaders instrumental in bringing the Olympics to Rio. He was present during the bidding process, and attended the 2009 IOC session in Copenhagen. He remains in a Rio prison after his arrest.

Cabral served as Governor from 2007 to 2014. He resigned after scandals and anti-corruption rallies engulfed his second term.

"Paes is accused of receiving $8.95 million illegally," Santoro said. "[He also] is facing other legal problems due to irregular acts of the city in the preparation of the Games, mainly by granting illegal benefits to companies involved with the event.

"Paes was a popular mayor during most of his government, but leaves the post rejected by a significant part of the population, amid scandals and defeat of his successor [Pedro Paulo]. His political future is undecided and will mainly depend on how the legal proceedings against him [turn out]."

Written by Aaron Bauer

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