SEATRIUM said last Thursday (Jun 1) that it believes the corruption probe it is facing has to do with events which happened before 2015, involving the old incarnation of the Sembcorp Marine group.

It made this statement in response to the May 31 announcement that Singapore’s Corrupt Practices Investigation Bureau (CPIB) had started investigating the company and some employees for alleged corruption in Brazil. 

Seatrium was formed in February 2023 through a merger of Sembcorp Marine and Keppel Offshore and Marine (O&M). The companies believed that the combined entity would be better placed to compete for larger contracts and pursue synergies arising from combined scale, footprint and capabilities.

However, in March, the Office of the Comptroller General of Brazil said it had initiated preliminary administrative proceedings against Seatrium’s wholly-owned subsidiary, Estaleiro Jurong Aracruz, for its past conduct linked to Operation Car Wash, a probe in Brazil against money-laundering that ballooned into a major corruption investigation.

However, the proceedings by the Brazilians, related to “alleged irregularities”, were suspended the following month.

The other half of Seatrium, Keppel O&M, was also embroiled in that probe, but its legal woes seem to have ended; further action by the authorities beyond a major fine has not been possible for lack of available evidence.

GET BT IN YOUR INBOX DAILY

Start and end each day with the latest news stories and analyses delivered straight to your inbox.

Sign UpVIEW ALL

The Business Times explains Operation Car Wash and outlines how the former Keppel O&M and Sembcorp Marine were tied to a corruption scandal halfway around the world. 

What is Operation Car Wash? 

Operation Car Wash was launched by the Brazilian authorities in 2014. In its initial years, the inquiry focused on companies which bribed politicians in exchange for state-run oil company Petrobras awarding them inflated contracts. 

One of the main players in the scandal was Brazilian construction conglomerate Odebrecht. The company eventually admitted to paying millions of dollars in bribes in multiple Latin American countries to secure public work contracts. The corruption scandal involving Odebrecht claimed victims including Peru’s then president Pedro Pablo Kuczynski, as well as Ecuador’s vice-president, Jorge Glas. 

As part of plea-bargains, the parties confessed to their crimes and spilled the beans, toppling a growing list of politicians and business executives. Critics of the task force, however, said the operation had taken its aggressive tactics too far. 

The anti-corruption unit that ran Operation Car Wash was shut down in February 2021, even as some prosecutors from that team continued their work in the organised crime unit of Brazil’s federal prosecutors’ office.

What happened at Sembcorp Marine?

In July 2019, Sembcorp Marine said a search warrant had been executed by Brazilian authorities on Estaleiro Jurong Aracruz (EJA), its subsidiary in Brazil. 

Martin Cheah Kok Choon, a former president of EJA, was later charged for money laundering and corruption in connection with certain drilling-rig construction contracts entered into by Sembcorp Marine subsidiaries with rig supplier Sete Brasil in 2012. 

Sembcorp Marine was reported to have clinched some US$5.5 billion in contracts from Sete Brasil. 

Guilherme Esteves de Jesus, who has been described as a currency trader, was also charged with money laundering. Companies connected to him had been engaged by SembMarine’s subsidiaries as consultants in Brazil.

No charges were brought against EJA then, but the initiation of preliminary administrative proceedings against it in March this year, as well as CPIB’s probe, show that it is not yet in the clear. 

What happened at Keppel O&M?

Between 2001 and 2014, Keppel O&M was found to have paid US$55 million in bribes to officials at Brazilian state-owned oil giant Petrobras and the Workers Party of Brazil, the then-governing political party, to win 13 contracts with Petrobras and Sete Brasil. 

It had concealed the payment by paying commissions to an intermediary under the guise of legitimate consulting agreements. The intermediary then made payments for the benefit of officials of Petrobras and other parties.

Keppel O&M was ordered by enforcement officials in Brazil, Singapore and the US to pay US$422.2 million in fines. It also received a conditional warning from the CPIB, in lieu of prosecution, for corruption offences punishable under the Prevention of Corruption Act. 

Several former key executives were also arrested in Singapore in connection with the scandal. 

In January this year, the CPIB issued stern warnings to six former senior management staff of Keppel Offshore & Marine (O&M). It said the decision not to prosecute them had to take into account factors such as evidentiary difficulties, with documents located in different jurisdictions and key witnesses outside Singapore, who cannot be compelled to give evidence in Singapore.