President Lula, Judge Moro and Poor Judgment by Mark Langevin

Federal Judge Sergio Moro and former President Lula

Federal Judge Sergio Moro and former President Lula

This week Brazilian Federal Judge Sergio Moro convicted former Brazilian President Luiz Inácio Lula da Silva of corruption and money laundering and sentenced the political icon to nine years and six months of jail along with a fine of nearly $209,000 USD. Judge Moro found Lula guilty of receiving a beachfront apartment in Guarujá located in the state of São Paulo. According to Judge Moro, Lula received the apartment and its reforms (valued at over $1 million USD) from the Petrobras contractor Group OAS in exchange for his direct influence over Petrobras and its decision to award contracts to this company.

The court found that OAS documents indicated that after the company took control of the beachfront condominium community in 2009 it proceeded to reserve and reform the “triplex” apartment for then President Lula and his late wife Marisa. Judge Moro commented on the evidence and argued that Lula and Marisa did not effectively communicate their decision to exercise an option to purchase the apartment after 2009, a violation of the rules imposed upon all the condominium members.

Lula’s lawyers, Cristiano Zanin Martins and Valeska Teixeira Martins, argued that the apartment was never owned by Lula or his wife, and that evidence exists that the apartment was being sold to another buyer with financing from the Caixa Economica. Lula’s defense team also insisted that Judge Moro was biased throughout the proceedings, engaged in arbitrary rulings, and should have recused himself from the trial. Indeed, Judge Moro has been scrutinized by his apparent decision in 2016 to secretly wiretap, record, and leak a conversation between then President Dilma Rousseff and Lula regarding the latter’s nomination to become the Minister of the Casa Civil (chief of staff) and evade Moro’s jurisdiction. The questionable leak led the Supreme Court to annul Lula’s nomination, effectively keeping the former president in Moro’s courtroom.

The trial of Lula has confirmed that the former president did not take active measures to avoid the appearance of “pay to play” procurement based corruption; a scheme thoroughly documented through Judge Moro’s Lava Jato prosecutions.  Pay to play corruption preceded Lula’s election in 2002 (for an excellent analysis of the scope of corruption and lack of prosecution prior to 2002 see Antonio Lassance’s article in Carta Maior), but it took on greater scope and political importance during Brazil’s rapid economic expansion from 2004 to 2010. Increasing government revenues, the rapid expansion of Petrobras, and its procurement contracts opened up the possibilities for pay to play corruption to finance major political parties and their candidates, as well as enrich Petrobras directors and several intermediaries (often known as “doleiros”).  Clearly Lula and his government benefited in the short term as pay to play served to expand the Workers Party influence around Brasilia as corruption flowed into campaign slush funds (known as “Caixa 2”) to elect and reelect candidates across a broad spectrum of political parties (see http://meucongressonacional.com/). Few, including Judge Moro, had any idea of the pervasive scope of the Lava Jato scheme, but it has tainted almost every leading political figure, current President Michel Temer, prominent political parties, and Brazilian building and engineering contractors. Throughout the first decade of the 21st century Lula and his Workers Party did little to confront the Lava Jato scheme and replace it with a transparent campaign financing system. This neglect has cost the party, condemned Lula, and all but shipwrecked the country. Lula’s poor judgment and his inability or unwillingness to set the record straight on the Lava Jato is catastrophic even if Judge Moro’s conviction is light on evidence and heavy on judicial bias.

President Lula and Federal Judge Sergio Moro missed an historic opportunity during the trial. Judge Moro has zealously pursued the former president through Brazil’s odd system for Federal judges that allows them to act as prosecutor, jury and judge all together in a confusing whirlwind of conflicting institutional interests. Rather than tread lightly and guarantee constitutional due process, Judge Moro used every power under his authority to publicly condemn Lula before the trial began, and may have engaged in unethical or illegal acts related to the wiretapping of then President Dilma. He also selected to hear a case based on evidence that does not clearly indicate that Lula enjoyed or benefited from the beachfront apartment under the control of OAS, which would seem to be an essential condition of any Quid pro quo; that any suspected influence peddling on OAS’ behalf be contingent upon a benefit enjoyed by the president. The underlying evidence and logic of Lula’s trial suggests that Judge Moro was zealous about this particular case, a relatively weak case in light of the scope of the Lava Jato scheme.  Why did Moro choose this case, one that did not feature a smoking gun or evidence that Lula directly owned, enjoyed, or benefited from the OAS apartment? The answer: poor judgment by Judge Moro.

Poor judgment by Lula and Moro leaves Brazil in the lurch. Lula’s popularity increased in the weeks prior to his conviction. Moro is just as popular, but among those impressed by his work or deadest against Lula and the Workers Party. Their popularity provides each ample limelight, but together they are unbeatable. Lula and Moro missed a great opportunity to shed light on how politics really works in Brasilia and throughout the state capitals of the nation. Procurement based pay to play corruption is really just a systematic function of a broader institutional requirement based on money in politics, a dysfunctional condition that condemns candidates and their parties to seek out dark money and assemble slush funds to win, to become elected. Judge Moro should be applauded for his x-ray of the function, but his trial of Lula distracted Brazilians from the dysfunction of the system. Former President Lula also punted, choosing to defend himself rather than publicly attacking a system of campaign finance and pay to play procurement corruption that undermines the democratic principle of one citizen – one vote. Poor judgment.

What if Judge Moro had tossed the charges aside, but on the condition that he and former President Lula sit in front of the cameras and together explain what democracy looks like in Brazil?

Brazil’s New Labor Law and the Union Contribution by Mark Langevin

The new labor-employment law reform that passed the Brazilian Senate and is ready for enactment will eliminate the “contribuição sindical” or “imposto sindical,” a mandated fee to finance labor unions that is assessed as one day’s earnings in the month of March and passed along to the representative union, state federation, and national confederations and centrals. The reform modifies the Article 579 of the Consolidated Labor Code (known as the Consolidação das Leis do Trabalho or CLT) that was established in 1937. Each worker was obliged to contribute whether or not affiliated with a union under the old CLT provision. The adopted reform makes the contribution voluntary.

Some in the labor movement, including the Central Única dos Trabalhadores (CUT), as well as critics of the “imposto sindical,” have sought to eliminate this mandatory deduction from workers’ pay for some time. The official line of the CUT is that each worker should decide to contribute, to become a member of his or her union, and to directly participate in the decisions of the union and provide for its financial sustainability. However, it is important to note that the CUT also defends the establishment of a union representational fee as part of the collective bargaining. This representational fee would be decided by a workers/union assembly in a majority vote and assessed to all workers covered by the agreement. This would allow for a voluntary contribution, but based on a collective majority to avoid the free-rider problem.

Immediately following the Senate vote, the government’s leader in the Senate, Romero Jucá (PMDB-Roraima) negotiated several modifications to the new reform that could be enacted by executive order. One of these modifications would be a gradual phase out of the union contribution. The Labor Minister, Ronaldo Nogueira, also confirmed that an executive order could also create a mechanism for assessing a representational fee, as envisioned by the CUT, and dependent on collective bargaining. Such a provision would favor those unions with active histories of collective bargaining and leave many of Brazil’s “ghost” unions without any history of collective bargaining scrambling for financial sustainability. However, such modifications to the new law are jeopardized by Brazil’s political crisis and efforts underway in the Brazilian congress to remove President Michel Temer.

Overall, the new law injects a new challenge into the Brazilian labor movement as it navigates both the political crisis and a strong push by congressional leaders to reform the social security system. The former union contribution provided a sustainable stream of financing for the labor movement, but also discouraged some unions from actively seeking the participation of those workers it legally represented. Now, labor unions will have to work hard to obtain the voluntary contribution or organize majorities of workers within a collective bargaining process to assess a representational fee-if the new law is modified through an executive order. This reform will transform the Brazilian labor movement, placing greater emphasis on union democracy, representation and collective bargaining, but also threatening to diminish union density and hollowing out the movement’s national political weight.

Temer Walks The Plank by Mark Langevin

In early 2016 then Vice-President Michel Temer decided that he would discreetly lead the efforts to force then President Dilma to walk the plank in an effort to curb the investigations of the Lava Jato taskforce. Dilma was impeached by the House of Deputies on April of 2016 and then permanently removed from office in August of 2016 for “crimes of responsibility” related to the “pedaladas,” or actions taken by the Federal Treasury to delay payments to the public banks (Banco do Brasil and Caixa Econômica) in order to gain financial advantage in the short term.

Federal and state governments in Brazil had frequently carried out these budgetary maneuvers well before the practice expanded under Dilma’s administration. According to the Federal Accounting Tribunal (TCU), the pedaladas expanded to $40 billion reais between 2012 and 2014. Few legislators complained about these practices, and the Federal Treasury paid off the pedaladas in late 2015, but not before Temer and his supporters began efforts to impeach the president.

In more ways than one, Temer and his ally, Eduardo Cunha- then President of the House of Deputies, organized this mutiny to place themselves in a position to govern Brazil while also taking measures to cover up their participation in Petrobras’ pay to play kickback corruption scandal known as the Lava-Jato or Petrolão. Just like seafaring pirates, Temer and his group stood in amusement as their efforts led Dilma to walk the plank, bound by the overwhelming congressional opposition to her democratically elected mandate that they organized and deployed to disrupt democracy. In April of 2016 I wrote,

Today, the PMDB stands ready to support President Dilma’s impeachment, paving the way for Temer to be sworn in as chief executive of a polarized nation in a deep recession. It is unlikely he can lead Brazil to overcome its economic and political challenges. Rather, Temer’s succession to the presidency may compound them by widening political polarization and raising concerns about his own role in political corruption, including the Lava Jato scheme.

Fifteen months later President Temer awaits his own execution by the hands of a demoralized congress and the decision of Deputy Rodrigo Maia, President of the House of Deputies, to step away from a full defense of the president. The Guardian reports

Temer has been under investigation due to plea bargain testimony by the wealthy businessman Joesley Batista of the giant meatpacking company JBS that linked the president and an aide to bribes and the president to an alleged endorsement of hush money for jailed ex-House Speaker Eduardo Cunha.

Attorney General Rodrigo Janot has formally denounced the President for corruption at the Supreme Court and now congress must vote whether to accept the charges. The Folha de São Paulo reports that Maia has told Temer that he may survive the first vote to remove the president, but is unlikely to overcome the repeated denunciations. The clock is ticking, but few are willing to venture a guess on how this latest installment in the Lava Jato may rock Brasilia. Should Temer be removed or resign, then Rodrigo Maia would seize the reigns of the executive branch until the Brazilian Congress selected a successor to serve the remainder of the term that expires at the end of 2018.

Temer’s removal forces most Brazilians to recognize that the Lava Jato is a systemic expression of an electoral system that privileges back door dealing over transparency and compels candidates to find dark money to finance their campaigns, parties and the leaders of their parties. Those with access to money lead the parties, and too often toward policy decisions that favor donors. The website, www.Meucongressionnacional.com provides a detailed account of the elected officials, their parties, and donors associated with the Lava Jato scandal. Currently 45 congressional representatives are implicated in the scandal across 5 major parties. This list does not include former elected officials or executive branch officials, including President Temer, currently under indictment or investigation for corruption.

Temer is likely to leave office, one way or another in the coming month or so as the “Fora Temer” movement focuses on his immediate removal and increasing numbers of congressional representatives step back from public support of his presidency. Standing at center-stage of this drama are the two featured reforms stemming from the last year’s constitutional amendment that caps federal government spending, namely the social security and employment law reforms. These reforms are controversial because the losers are mostly young workers that will lose expected retirement benefits while also having fewer employment related protections. If the supporters of such reforms, including former president Fernando Henrique Cardoso’s PSDB, understand that Temer’s preservation is a condition for approval, then this party will likely work behind the scenes to stave off the president’s removal from office until these reforms are secured. Right now the PSDB is awaiting the vote on employment law reform before making a decision on whether to pull its support and participation from Temer’s government. Expect this measure to pass, possibly today, and then all hell breaks loose for Temer.