Brazilians in Petrobras scandal used Malta for tax purposes

Costruction giant Odebrecht, now caught up in Brazilian party financing and graft scandal, has three subsidiaries registered in Malta

Marcelo Oderbrecht has been convicted on graft charges
Marcelo Oderbrecht has been convicted on graft charges

A construction giant embroiled in one of Brazil’s most serious of political scandals, still uses Malta as a back-office base to manage its tax exposure and save millions.

Odebrecht first hit the Maltese headlines as the much-vaunted multinational which prime minister Lawrence Gonzi claimed had upped sticks after the 2011 Libyan war to move its operation to Malta.

It turned out that the company had only evacuated its workers to the island, and that its four-man operation was in the process of winding down. Labour taunted Gonzi with a billboard depicting him wearing a Brazilian national football team shirt, with the number zero emblazoned on his back.

Lampooning Gonzi: the former PM had claimed Odebrecht were relocating to Malta
Lampooning Gonzi: the former PM had claimed Odebrecht were relocating to Malta

Since then, Odebrecht’s fortunes have turned sour: it is at the centre of Brazil’s Petrobras corruption investigation, and many of its key executives – who are listed as directors of Odebrecht’s Maltese holding company – are trying to negotiate a leniency deal that could prove politically explosive to Brazil’s political leaders.

In Malta, the subsidiaries of Odebrecht SA post multi-million profits to benefit from tax refunds that can slash up to 85% of the tax due to the Commissioner for Inland Revenue.

Odebrecht SA is the 99% owner of Odebrecht Construction Malta (OCM), which ran operations in Libya.

In 2008 and 2009, OCM – which does not generate any activity in Malta and is registered as an advisory company – registered sales of over €250 million and declared gross profits of €13 million and €22 million respectively. Since hostilities broke out in Libya, the company no longer operates there.

It paid tax at the highest 35% rate, of €4.6 million and €7.8 million respectively for those two years, before benefiting from anything between 66% to 85% in tax refunds since none of its activities were carried out in Malta.

Over 2008 and 2009, OCM paid an effective tax of anything between €1.8 million to €4.2 million.

Another related Odebrecht company based in Malta is Odebrecht Solutions Malta (OSM), whose owner is Tenenge Overseas, which is based in the Cayman Islands.

Malta has served as a tax base for countless multinationals which channel their profits into Maltese subsidiaries: examples include Azerbaijani state oil company SOCAR’s Swiss trading hub, and Nando’s chicken restaurant, which happens to have Portuguese theme. The ‘lusophone’ connection goes further, with Africa’s richest woman, Isabel dos Santos, the daughter of Angolan dictator José dos Santos, also setting up shop in Malta.

Indeed, Odebrecht enjoys an 11% stake in Angolan state diamond company Endiama, whose marketing arm Sodiam is a part-shareholder of a Maltese company, Victoria Holdings. The other owner is Melbourne Investments, a Dutch company owned by Dos Santos’s husband Sidika Dokolu.

Both Odebrecht and Isabel dos Santos’s interests in Malta were at one time initially managed by the same advisory firm.

Petrobras scandal

Marcelo Odebrecht – sentenced to 19 years’ jail in the Petrobras case – and his executives are considering giving information on alleged corrupt business dealings in exchange for more lenient sentences, in a move that could force Lula da Silva’s prosecution. 

Odebrecht executives are accused of paying bribes to Petrobras executives and politicians from President Rousseff’s Workers’ Party (Partido dos Trabalhadores, or PT) and doing favours for former President Lula da Silva.

The favours allegedly include renovating da Silva’s rural getaway and making donations to his think-tank and paying him for speeches, in return for government contracts and finance.

Prosecutors say at least €1.6 billion was diverted from state oil company Petrobras in inflated contracts that flowed in the form of illegal campaign contributions and bribes to the PT.

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