Special Report: In Brazil, organized crime siphons billions from gas stations

Special Report: In Brazil, organized crime siphons billions from gas stations

A gas station is seen in Rio de Janeiro, Brazil March 10, 2021. REUTERS/Pilar Olivares

RIO DE JANEIRO Travel throughout Brazil and also you’ll spot indicators nearly in every single place for BR Distribuidora, the proprietor of South America’s largest gas station chain. The acquainted green-and-yellow emblem of the corporate, previously a unit of state oil large Petrobras, is a fixture in huge cities and hamlets alike.

Less well-known is BR’s effort to purge its retail community of alleged crooks. In 2019, the corporate booted a whole bunch of unbiased franchisees from its community for purported “irregularities,” a BR spokesman instructed Reuters, together with evading gasoline taxes and ripping off prospects with adulterated gasoline. In all, BR stripped its title from 730 retailers, roughly 10% of its Brazilian community on the time, the corporate stated.

But different suspected criminals proceed to function BR stations, Reuters has discovered. A significant franchisee within the state of Rio de Janeiro, for instance, has been indicted by state prosecutors at the very least 12 occasions for fuel-related crimes over the previous 15 years and is at the moment on trial for his alleged participation in a sprawling fuel-smuggling ring, in response to court docket paperwork reviewed by Reuters. He has not been convicted in any of the court docket instances examined by the information company.

BR’s scenario will not be distinctive. Crooks have infiltrated the 4 largest gasoline chains in Brazil, the place they’re estimated to regulate a whole bunch, if not 1000’s, of stations, in response to Reuters interviews with greater than two dozen trade and regulation enforcement officers. The information group additionally reviewed 1000’s of pages of court docket instances and enforcement information from Brazil’s oil regulator.

Cheats promote stolen gasoline and rig pumps to brief prospects the total quantity they paid for, the interviews and paperwork present. More critical crimes abound, too. Some entrepreneurs use their stations to launder money for gangs just like the First Capital Command, South America’s largest organized crime group, authorities allege, in addition to for “militias” – violent legal enterprises composed partly by retired and off-duty cops.

In southern Brazil, a station proprietor is going through trial for the 2017 homicide of the pinnacle of an trade watchdog that was investigating suspected fraud on the businessman’s operations.

Gas station graft is profitable. Ill-gotten positive factors at Brazil’s pumps quantity to 23 billion reais ($4.15 billion) yearly, in response to a November estimate from the Instituto Combustivel Legal, or ICL, an trade group based final yr to fight fraud.

Brazil’s President Jair Bolsonaro has blamed unscrupulous gas station house owners for dishonest the treasury and fleecing motorists amid public anger over current gasoline costs hikes.

“It’s a business worth billions,” Bolsonaro stated throughout a dwell broadcast on a number of social media platforms in February.

In statements to Reuters, Brazil’s largest gasoline distributors by market share – BR, Ipiranga, Raizen and Ale – acknowledged grappling with unhealthy actors of their stores, all of that are owned by unbiased franchisees. Together these 4 corporations account for almost half the gas stations in Brazil. The distributors stated they work diligently to cull miscreants, feeding information about alleged misconduct to police, prosecutors and regulators.

These corporations have ties to a number of the largest names within the oil trade. Raizen Combustiveis SA, for instance, is a three way partnership between Royal Dutch Shell PLC and native ethanol producer Cosan SA; it oversees roughly 5,000 Shell-branded gas stations in Brazil, in response to the newest information from Brazil’s oil regulator. Ale Combustiveis, with round 1,500 stations, is a unit of Switzerland’s Glencore PLC. Top participant BR, the previous subsidiary of Petroleo Brasileiro SA, boasts roughly 7,800 areas. Ipiranga is a subsidiary of São Paulo-based Ultrapar Participacoes SA and has 7,105 stations in Brazil.

Lawsuits geared toward stripping alleged wrongdoers of their franchises can take years to wend their means via Brazil’s court docket system, trade officers stated. Periodic purges, like BR’s 2019 housecleaning, can quantity to whack-a-mole, with unhealthy actors discovering methods to achieve management of different stations, stated Carlo Faccio, the pinnacle of ICL.

“The situation of the fuel industry is very bad,” he stated. “We’re very far behind. There’s a lot we have to do.”

No authorities company tracks what number of gas stations are linked to convicted or suspected criminals in Brazil. Reuters analyzed court docket information within the state of Rio de Janeiro, which authorities say is a hotbed of this illicit exercise.

The information group recognized 20 station house owners who’ve been indicted or convicted for fuel-related offenses since 2015. Collectively, the 101 gas stations they personal quantity to roughly 4% of all retail gasoline retailers in Rio state. Most of these house owners had been linked to organized legal teams, in response to prosecutors and court docket paperwork they submitted in numerous legal instances.

Guilherme Vinhas, a companion on the Rio de Janeiro regulation agency Vinhas e Redenschi Advogados who has labored for all the largest distributors, stated legal infiltration of the retail gasoline sector had turn into a serious concern for his shoppers.

“The companies are monitoring this,” Vinhas stated, “and they’re worried.”

Special Report: In Brazil, organized crime siphons billions from gas stations

A employee pumps a automobile with gasoline at a gas station in Rio de Janeiro, Brazil March 10, 2021. REUTERS/Pilar Olivares

Irresistible opportuniy

Fuel-related crimes are frequent in oil-producing nations in rising markets.

In Mexico, for instance, thieves tapping into pipelines price state oil firm Pemex 15 million pesos ($728,000) per day, Chief Executive Octavio Romero Oropeza stated final yr. This purloined gasoline continuously is fenced by complicit gas station house owners, Mexican authorities say.

Still, trade executives say Brazil’s gasoline crooks are among the many world’s worst, due partly to a tax routine they are saying invitations dishonest. Fuel taxes right here fluctuate broadly from state to state. For instance, the state tax on ethanol, offered in just about all Brazilian gas stations, is 32% in Rio de Janeiro state, in comparison with 13% in neighboring São Paulo. That creates an incentive for criminals to buy gasoline from low-tax jurisdictions and resell it in high-tax states to crooked station house owners who cost prospects the upper tax and pocket the distinction, trade officers stated.

“It’s the most complex (tax system) that I know,” Marcelo Araújo, the chief government of Ipiranga, stated throughout a digital oil trade convention in December.

Criminals in Brazil reap 7.2 billion reais ($1.3 billion) yearly from gasoline tax evasion alone, in response to a 2019 examine by the Fundação Getúlio Vargas, a Rio de Janeiro suppose tank. Adulterating gasoline with ethanol or different liquids is one other trick to spice up earnings, authorities stated.

But a number of the largest rewards for station house owners, authorities and firm sources stated, comes from utilizing their retailers to launder cash for legal organizations.

Among the Rio gas station house owners with legal information recognized by Reuters is Cleber “Clebinho” Oliveira da Silva. He at the moment owns two gas stations in Rio, in response to company registration information: one an unbiased station unaffiliated with any nationwide model, the opposite a franchised location for Ipiranga.

In 2018, da Silva was convicted in state court docket of belonging to the Justice League, one among Rio’s largest legal militias. Da Silva, now 37, was sentenced to 6 years in jail. He has remained free as he appeals that call.

In 2019, da Silva was sentenced to pay a advantageous and perform neighborhood service in a separate case for utilizing his unbiased station to launder the Justice League’s illicit earnings. The nature of the neighborhood service and quantity of the advantageous was not specified within the sentencing doc. Authorities say the Justice League is concerned in a wide range of unlawful actions, together with gasoline smuggling, auto theft and safety rackets.

Prosecutors didn’t set up how a lot cash da Silva laundered. But in his resolution, the choose cited witness testimony alleging that the station’s month-to-month income greater than quadrupled to 900,000 reais ($163,000) after da Silva bought a chunk of the enterprise in 2015.

Within a yr of that conviction, da Silva bought one other station, this one a franchised location for Ipiranga, company registration and regulatory information present.

Ipiranga instructed Reuters that da Silva was not an proprietor of that station when it entered the corporate’s distribution community in 2008, and that it was unaware of his involvement. “If this person currently has a stake … he did it completely behind the back of Ipiranga and in a way that goes against what is written on the franchise contract,” the corporate stated in an e-mailed assertion.

Da Silva couldn’t be reached for remark. His lawyer didn’t reply to requests for remark and declined to supply contact information for his consumer.

Another alleged criminal is José Rodrigo Gallo de Faria, a former Shell franchisee in Rio de Janeiro. In 2019, state prosecutors indicted de Faria for receiving stolen gasoline, in response to a duplicate of the indictment seen by Reuters. He is free pending trial.

Police described de Faria in that indictment because the “main sponsor” of the so-called known as Xerem Militia, which makes a speciality of robbing gasoline from pipelines. According to the indictment, the militia in April 2019 illegally tapped right into a pipeline in a working class neighborhood close to the town of Rio de Janeiro, setting off an explosion that killed an eight-year-old lady. De Faria was not implicated within the lady’s demise.

A lawyer for de Faria, Ralph Hage, stated his consumer was harmless and will doc that his gasoline was bought legally. Hage didn’t present proof of these authorized purchases to Reuters, however stated he would produce the related documentation in court docket.

Raizen, which oversees the Shell model in Brazil, declined to remark about de Faria. His outlet not bears the Shell emblem. In January, just a few weeks after Reuters first contacted Raizen about de Faria, his station exited the Shell community and turned unbiased, in response to registration information filed with Brazil’s nationwide oil regulator.

One of the best-known figures amongst Rio de Janeiro’s gas station house owners is Mario “Marinho” Augusto de Castro, who owns a stake in at the very least 43 retailers within the state, in response to company registration information reviewed by Reuters.

De Castro has been the goal of at the very least 15 regulation enforcement investigations over the previous twenty years, all involving gasoline, in response to state police information reviewed by Reuters.

At current he’s defending himself in at the very least 5 legal instances. In a type of instances, filed in 2008, prosecutors charged de Castro with taking part in a big legal group that smuggled low-tax gasoline into Rio state.

At least 18 of de Castro’s stations are franchised areas for BR, and at the very least seven stations are franchised areas for Shell, the information present.

Renato Alves, a lawyer for de Castro, stated his consumer has by no means been convicted of a crime and denies wrongdoing in all ongoing court docket instances. He stated de Castro’s a number of franchise agreements with BR and Raizen present he’s well-respected within the trade. Alves added that the sheer variety of authorities rules de Castro should take care of throughout his massive portfolio of stations has made his consumer susceptible to “undeserved” indictments.

BR stated it had “no knowledge of a criminal conviction related to the activities of Mr. Mario Augusto de Castro,” including that the corporate “will reinforce the mechanisms that it uses to curb” suspected wrongdoing by its franchisees.

Raizen declined to remark about de Castro.

Special Report: In Brazil, organized crime siphons billions from gas stations

A employee of National Petroleum Agency ANP, makes a process to examine gasoline high quality at a gas station in Rio de Janeiro, Brazil March 10, 2021. REUTERS/Pilar Olivares

Fighting again

Fuel distributors continuously press lawsuits in opposition to franchisees they think of irregularities in an effort to terminate their franchise agreements, in response to a number of firm sources and court docket instances reviewed by Reuters.

But these instances can take years to work their means via Brazil’s crowded courts, the interviews and authorized information present. Even victories don’t carry swift reduction.

“Non-compliant (franchisees) typically take advantage of all sorts of legal maneuvers to delay compliance with judicial decisions,” a spokeswoman for BR wrote in an e-mail.

Brazilian regulation dictates that retail gas stations can’t be owned by oil producers or distributors. Rather, they should be owned by unbiased third events – often people – who’re free to purchase and promote stations amongst themselves. While franchise agreements sometimes give distributors the proper to approve these transactions, such gross sales nonetheless create a backdoor via which unscrupulous actors should purchase into well-known chains by dealing straight with station house owners, stated Délio Campos, a spokesman for Glencore’s Ale community.

“In some cases, despite contractual conditions forbidding it, property can change hands without the company’s consent having been obtained,” Campos stated.

Da Silva, the convicted cash launderer, bought his Ipiranga station in 2019 from two people with a pre-existing franchise settlement with the corporate, regulatory information present.

Ipiranga stated any possession stake by da Silva occurred with out its information. Da Silva couldn’t be reached for remark. His lawyer didn’t reply to a request for remark.

Authorities say gasoline crime has turn into so profitable to Brazil’s underworld that these making an attempt to cease it are in danger.

On March 23, 2017, Fabrizzio Machado da Silva, the pinnacle of the Brazilian Association for Fighting Fuel Fraud, an trade watchdog in southern Brazil, was shot to demise exterior his house within the metropolis of Curitiba. Police allege the hit was organized by Onildo Chaves de Córdova II, an space businessman upset on the affiliation’s investigations into potential gasoline adulteration and pump rigging at three of his unbiased gas stations, in response to the legal indictment and Luis Roberto de Oliveira Zagonel, a lawyer for da Silva’s household.

State prosecutors charged Chaves with homicide. He is free pending trial. No trial date has been set.

A lawyer for Chaves, André Pontarolli, stated his consumer is harmless. He added that police probes into Chaves’ enterprise practices haven’t resulted in any indictments.

The Fighting Fuel Fraud group, in the meantime, disbanded shortly after da Silva’s homicide, Zagonel stated.

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