Cornell law student and EMI’s Casanova discuss Operation Car Wash

By: Katelyn Godoy
Lourdes and Sergio seated together
Professor Lourdes Casanova and Sergio Bruno Cabral Fernandes discuss Brazil’s ongoing operation to take down systemic corruption.

Brazil underwent, and continues to undergo, the largest investigation into corruption and money laundering in the history of Latin America. Known as Operation Car Wash, it has successfully placed hundreds of politicians in jail, with hundreds more being prosecuted. Sergio Bruno Cabral Fernandes, a current LLM student at Cornell Law School, is a public prosecutor in Brazil who led an operation task force in the investigation. He delved into the specifics of Operation Car Wash, his work, and the dangers of systemic corruption at a talk held in conjunction with Cornell Law School and the Samuel Curtis Johnson Graduate School of Management. He was joined by Professor Lourdes Casanova, senior lecturer at Johnson and director of the Emerging Markets Institute, who has spent several years conducting extensive research into the companies and corruption of Brazil.

Operation Car Wash is an investigation into corruption and money laundering involving the state-owned oil company Petrobras. Upon further investigation, it was found that corruption was everywhere: other state-owned companies, banks, state departments, and even other nations.

How did Operation Car Wash begin?

What initially began as an investigation into money laundering at a local car wash opened the public’s eyes to the systemic corruption in Brazil. It was uncovered that the car wash was tied to Alberto Youssef, a known black currency operator. Further probing led investigators to discover ties between Youssef and other prominent individuals, politicians, powerful businesspeople, and money launderers. This revealed a network of large-scale corruption.

Systemic corruption in Brazil

Systemic corruption in Brazil drew people in from the business and political worlds, in a scheme for self-gain at the expense of others and, ultimately, the law. The scheme worked in several parts. Initially, construction companies created cartels to coordinate agreements. These construction companies overcharged Petrobras. Petrobras, being a state-owned company, had executives appointed by politicians. Several of these appointees turned a blind eye to the heavily overcharged prices of the construction companies in exchange for bribes given to executives of Petrobras and to politicians who sponsored and appointed these executives. Politicians used this money for their personal or political gain, such as funding their election campaigns. Although the workings of this scheme were specific to Petrobras, similar schemes and acts were found in other state-owned organizations as well.

Throughout the investigation, several politicians attempted to pass laws to hinder the investigation. There were instances where businesspeople and politicians intimidated prosecutors, subpoenaed prosecutors, sued prosecutors for civil damages, and other actions. However, nothing got in the way of Operation Car Wash.

The consequences of systemic corruption

Corruption is an issue that numerous countries, including Brazil, have been grappling with for decades. Systemic corruption tends to occur when weak or inefficient judicial systems exist. White-collar criminals take advantage of inefficiencies of the judicial system, which can cause proceedings to last for decades. However, it is the general public that truly suffers from systemic corruption, because the siphoned-off funds could have been used to implement public policies and services, such as in health, education, infrastructure, and others, that would have benefited the public and aided with the overall economic development of Brazil.

Yet, the largest consequence of systemic corruption is the public’s loss of trust in the government and its institutions. In fact, during Operation Car Wash, Brazilians took to the streets to protest for the prosecution of the key players in this corruption scandal. Moreover, the loss of trust in the government allows for populism to set in and take advantage of the public’s lack of confidence in its institutions.

Nevertheless, Brazil is making strides in fighting corruption at a rate unprecedented in the country’s history. Operation Car Wash has given me a sense of hope that corruption can be tackled. Having grown up in India, I witnessed corruption scandals unfolding in the news frequently. As a kid, I always thought it was something that could never be fixed, simply because the individuals involved in the corruption often were powerful or influential. But the courage of Brazilian prosecutors shows that with a strong judicial system, and a strong will of the public, corruption can be tackled. And although the process may take a long time, it is an achievable task.

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—Written by Vineetha Pachava ’22 (Arts & Sciences), a student writer for the Emerging Markets Institute