Fallen Billionaire Batista’s Shipyard a Target in Graft Probe

(Bloomberg) -- Former billionaire Eike Batista, who made and lost more than $30 billion during Brazil’s commodities boom, is now entangled in the country’s biggest corruption scandal.

The businessman is under investigation in the so-called Carwash probe, and one of his former chief executive officers has been temporarily arrested for allegedly paying bribes to win work with state-controlled oil producer Petroleo Brasileiro SA four years ago. Former finance minister Guido Mantega, who was the chairman of Petrobras’ board at the time, was also temporarily arrested on Thursday. 

Fallen Billionaire Batista’s Shipyard a Target in Graft Probe

Eike Batista

Photographer: Patrick Fallon/Bloomberg

Batista, who became famous when he took a group of energy and logistics startups public, gave “spontaneous testimony” to police in May, federal prosecutor Carlos Fernando dos Santos Lima told journalists. In the testimony, Batista said Mantega requested 5 million reais in 2012, worth $2.35 million at the time, to repay campaign debts of the ruling Workers’ Party. He returned in June with documents that were used to arrest Mantega on Thursday. The minister was released few hours after being taken into custody by decision of a federal judge.

The arrest of Luiz Carneiro, former CEO of OSX Brasil SA, was prompted by alleged irregularities in a contract that Integra, a joint venture between OSX and Mendes Junior Engenharia SA, won with Petrobras in mid-2012 to finish work on the P-67 and P-70 floating production vessels. Carneiro and executives from Mendes Junior paid bribes to get confidential information that helped them win the tender, according to testimonies collected by plea bargain agreements that were released by the court handling the case.

The investigations into OSX brings a new chapter in the downfall of the investor-darling-turned-pariah who sold shares in six companies in a span of six years and lost his wealth even faster when his commodities and energy empire collapsed. Batista was banned from managing public companies for five years last year, and is also under investigation for insider trading.

For now, Batista is a witness in the case and no arrest warrant for him has been issued, according to Lima, the prosecutor leading the Carwash investigation. Still, investigators are following up on allegations from other witnesses that Batista knew OSX paid bribes to win $922 million worth of engineering work on the two offshore production vessels, Lima said. He added that the close proximity between when OSX won the contract and Mantega’s request for a campaign contribution raises doubts.

Batista denied through his lawyer that he knew of any bribes. “He said he never managed that contract, that everything was done by Mendes Junior, and that he doesn’t have any information on this,” Batista’s lawyer Sergio Bermudes said by phone from Rio de Janeiro. “Eike was very surprised.”

Mendes Junior and OSX didn’t respond to requests for comment. Efforts to reach Carneiro through Sete Brasil, a drilling rig supplier under bankruptcy protection that he currently runs, were unsuccessful. Petrobras said it is collaborating with authorities on Carwash and is working to recover money lost to graft.

Batista’s commodities empire collapsed in 2013 when his oil company failed to produce enough to pay its debts. That created a chain reaction of unpaid bills to OSX, which went into bankruptcy in 2013 and never completed the Petrobras contract.