In Brazil, organized crime siphons billions from gas stations
RIO DE JANEIRO - Travel across Brazil and you’ll spot signs almost everywhere for BR Distribuidora, the owner of South America’s largest gas station chain. The familiar green-and-yellow logo of the company, formerly a unit of state oil giant Petrobras, is a fixture in big cities and hamlets alike.
Less well-known is BR’s effort to purge its retail network
of alleged crooks. In 2019, the company booted hundreds of independent
franchisees from its network for purported “irregularities,” a BR spokesman
told Reuters, including evading fuel taxes and ripping off customers with
adulterated gasoline. In all, BR stripped its name from 730 outlets, roughly
10% of its Brazilian network at the time, the company said.
But other suspected criminals continue to operate BR
stations, Reuters has found. A major franchisee in the state of Rio de Janeiro,
for example, has been indicted by state prosecutors at least 12 times for
fuel-related crimes over the past 15 years and is currently on trial for his
alleged participation in a sprawling fuel-smuggling ring, according to court
documents reviewed by Reuters. He has not been convicted in any of the court
cases examined by the news agency.
BR’s situation is not unique. Crooks have infiltrated the
four largest gasoline chains in Brazil, where they are estimated to control
hundreds, if not thousands, of stations, according to Reuters interviews with
more than two dozen industry and law enforcement officials. The news
organization also reviewed thousands of pages of court cases and enforcement
records from Brazil’s oil regulator.
Cheats sell stolen gasoline and rig pumps to short customers
the full amount they paid for, the interviews and documents show. More serious
crimes abound, too. Some entrepreneurs use their stations to launder cash for
gangs like the First Capital Command, South America’s largest organized crime
group, authorities allege, as well as for “militias” - violent criminal
enterprises composed in part by retired and off-duty cops.
In southern Brazil, a station owner is facing trial for the
2017 murder of the head of an industry watchdog that was investigating
suspected fraud at the businessman’s operations.
Gas station graft is lucrative. Ill-gotten gains at Brazil’s
pumps amount to 23 billion reais ($4.15 billion) annually, according to a
November estimate from the Instituto Combustivel Legal, or ICL, an industry
group founded last year to combat fraud.
Brazil’s President Jair Bolsonaro has blamed unscrupulous gas
station owners for cheating the treasury and fleecing motorists amid public
anger over recent fuel prices hikes.
“It’s a business worth billions,” Bolsonaro said during a
live broadcast on multiple social media platforms in February.
In statements to Reuters, Brazil’s largest fuel distributors
by market share - BR, Ipiranga, Raizen and Ale - acknowledged grappling with
bad actors in their retail outlets, all of which are owned by independent
franchisees. Together these four firms account for nearly half the gas stations
in Brazil. The distributors said they work diligently to cull miscreants,
feeding information about alleged misconduct to police, prosecutors and
regulators.
These companies have ties to some of the biggest names in
the oil industry. Raizen Combustiveis SA, for example, is a joint venture
between Royal Dutch Shell PLC and local ethanol producer Cosan SA; it oversees
roughly 5,000 Shell-branded gas stations in Brazil, according to the most
recent data from Brazil’s oil regulator. Ale Combustiveis, with around 1,500
stations, is a unit of Switzerland’s Glencore PLC. Top player BR, the former
subsidiary of Petroleo Brasileiro SA, boasts approximately 7,800 locations.
Ipiranga is a subsidiary of São Paulo-based Ultrapar Participacoes SA and has
7,105 stations in Brazil.
Lawsuits aimed at stripping alleged wrongdoers of their
franchises can take years to wend their way through Brazil’s court system,
industry officials said. Periodic purges, like BR’s 2019 housecleaning, can
amount to whack-a-mole, with bad actors finding ways to gain control of other
stations, said Carlo Faccio, the head of ICL.
“The situation of the fuel industry is very bad,” he said.
“We’re very far behind. There’s a lot we have to do.”
No government agency tracks how many gas stations are linked
to convicted or suspected criminals in Brazil. Reuters analyzed court records
in the state of Rio de Janeiro, which authorities say is a hotbed of this
illicit activity.
The news organization identified 20 station owners who have
been indicted or convicted for fuel-related offenses since 2015. Collectively,
the 101 gas stations they own amount to roughly 4% of all retail fuel outlets
in Rio state. Most of those owners were linked to organized criminal groups,
according to prosecutors and court documents they submitted in various criminal
cases.
Guilherme Vinhas, a partner at the Rio de Janeiro law firm
Vinhas e Redenschi Advogados who has worked for all of the largest
distributors, said criminal infiltration of the retail fuel sector had become a
major concern for his clients.
“The companies are monitoring this,” Vinhas said, “and
they’re worried.”
IRRESISTIBLE OPPORTUNITY
Fuel-related crimes are common in oil-producing nations in
emerging markets.
In Mexico, for example, thieves tapping into pipelines cost
state oil company Pemex 15 million pesos ($728,000) per day, Chief Executive
Octavio Romero Oropeza said last year. This purloined fuel frequently is fenced
by complicit gas station owners, Mexican authorities say.
Still, industry executives say Brazil’s fuel crooks are
among the world’s worst, due in part to a tax regimen they say invites
cheating. Fuel taxes here vary widely from state to state. For example, the
state tax on ethanol, sold in virtually all Brazilian gas stations, is 32% in
Rio de Janeiro state, compared to 13% in neighboring São Paulo. That creates an
incentive for criminals to purchase fuel from low-tax jurisdictions and resell
it in high-tax states to crooked station owners who charge customers the higher
tax and pocket the difference, industry officials said.
“It’s the most complex (tax system) that I know,” Marcelo
Araújo, the chief executive of Ipiranga, said during a virtual oil industry
conference in December.
Criminals in Brazil reap 7.2 billion reais ($1.3 billion)
annually from fuel tax evasion alone, according to a 2019 study by the Fundação
Getúlio Vargas, a Rio de Janeiro think tank. Adulterating gasoline with ethanol
or other liquids is another trick to boost profits, authorities said.
But some of the biggest rewards for station owners,
authorities and company sources said, comes from using their outlets to launder
money for criminal organizations.
Among the Rio gas station owners with criminal records
identified by Reuters is Cleber “Clebinho” Oliveira da Silva. He currently owns
two gas stations in Rio, according to corporate registration records: one an
independent station unaffiliated with any national brand, the other a
franchised location for Ipiranga.
In 2018, da Silva was convicted in state court of belonging
to the Justice League, one of Rio’s largest criminal militias. Da Silva, now
37, was sentenced to six years in prison. He has remained free as he appeals
that decision.
In 2019, da Silva was sentenced to pay a fine and carry out
community service in a separate case for using his independent station to
launder the Justice League’s illicit profits. The nature of the community
service and amount of the fine was not specified in the sentencing document.
Authorities say the Justice League is involved in a variety of illegal
activities, including fuel smuggling, auto theft and protection rackets.
Prosecutors did not establish how much money da Silva
laundered. But in his decision, the judge cited witness testimony alleging that
the station’s monthly revenue more than quadrupled to 900,000 reais ($163,000)
after da Silva purchased a piece of the business in 2015.
Within a year of that conviction, da Silva purchased another
station, this one a franchised location for Ipiranga, corporate registration
and regulatory records show.
Ipiranga told Reuters that da Silva was not an owner of that
station when it entered the company’s distribution network 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 company said in an e-mailed
statement.
Da Silva could not be reached for comment. His attorney did
not respond to requests for comment and declined to provide contact information
for his client.
Another alleged crook 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, according to a copy of the indictment
seen by Reuters. He is free pending trial.
Police described de Faria in that indictment as the “main
sponsor” of the so-called called Xerem Militia, which specializes in robbing
fuel from pipelines. According to the indictment, the militia in April 2019
illegally tapped into a pipeline in a working class neighborhood near the city
of Rio de Janeiro, setting off an explosion that killed an eight-year-old girl.
De Faria was not implicated in the girl’s death.
A lawyer for de Faria, Ralph Hage, said his client was
innocent and could document that his fuel was purchased legally. Hage did not
provide proof of those legal purchases to Reuters, but said he would produce
the relevant documentation in court.
Raizen, which oversees the Shell brand in Brazil, declined
to comment about de Faria. His outlet no longer bears the Shell logo. In
January, a few weeks after Reuters first contacted Raizen about de Faria, his
station exited the Shell network and turned independent, according to
registration records filed with Brazil’s national oil regulator.
One of the best-known figures among Rio de Janeiro’s gas
station owners is Mario “Marinho” Augusto de Castro, who owns a stake in at
least 43 outlets in the state, according to corporate registration records
reviewed by Reuters.
De Castro has been the target of at least 15 law enforcement
investigations over the past two decades, all involving fuel, according to
state police records reviewed by Reuters.
At present he is defending himself in at least five criminal
cases. In one of those cases, filed in 2008, prosecutors charged de Castro with
participating in a large criminal organization that smuggled low-tax fuel into
Rio state.
At least 18 of de Castro’s stations are franchised locations
for BR, and at least seven stations are franchised locations for Shell, the
records show.
Renato Alves, a lawyer for de Castro, said his client has
never been convicted of a crime and denies wrongdoing in all ongoing court
cases. He said de Castro’s multiple franchise agreements with BR and Raizen
show he is well-respected in the industry. Alves added that the sheer number of
government regulations de Castro must contend with across his large portfolio
of stations has made his client vulnerable to “undeserved” indictments.
BR said it had “no knowledge of a criminal conviction related
to the activities of Mr. Mario Augusto de Castro,” adding that the company
“will reinforce the mechanisms that it uses to curb” suspected wrongdoing by
its franchisees.
Raizen declined to comment about de Castro.
FIGHTING BACK
Fuel distributors frequently press lawsuits against
franchisees they suspect of irregularities in an effort to terminate their
franchise agreements, according to several company sources and court cases
reviewed by Reuters.
But those cases can take years to work their way through
Brazil’s crowded courts, the interviews and legal records show. Even victories
don’t bring swift relief.
“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 law dictates that retail gas stations cannot be
owned by oil producers or distributors. Rather, they must be owned by
independent third parties - usually individuals - who are free to buy and sell
stations among themselves. While franchise agreements typically give
distributors the right to approve these transactions, such sales nonetheless
create a backdoor through which unscrupulous actors can buy into well-known
chains by dealing directly with station owners, said Délio Campos, a spokesman
for Glencore’s Ale network.
“In some cases, despite contractual conditions forbidding
it, property can change hands without the company’s consent having been
obtained,” Campos said.
Da Silva, the convicted money launderer, purchased his
Ipiranga station in 2019 from two individuals with a pre-existing franchise
agreement with the company, regulatory records show.
Ipiranga said any ownership stake by da Silva happened
without its knowledge. Da Silva could not be reached for comment. His lawyer
did not respond to a request for comment.
Authorities say fuel crime has become so lucrative to
Brazil’s underworld that those trying to stop it are at risk.
On March 23, 2017, Fabrizzio Machado da Silva, the head of
the Brazilian Association for Fighting Fuel Fraud, an industry watchdog in
southern Brazil, was shot to death outside his home in the city of Curitiba.
Police allege the hit was arranged by Onildo Chaves de Córdova II, an area
businessman upset at the association’s investigations into potential fuel adulteration
and pump rigging at three of his independent gas stations, according to the
criminal indictment and Luis Roberto de Oliveira Zagonel, a lawyer for da
Silva’s family.
State prosecutors charged Chaves with murder. He is free
pending trial. No trial date has been set.
A lawyer for Chaves, André Pontarolli, said his client is
innocent. He added that police probes into Chaves’ business practices have not
resulted in any indictments.
The Fighting Fuel Fraud group, meanwhile, disbanded shortly
after da Silva’s murder, Zagonel said.
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