The ever-widening bribery scandal at Brazil's parastatal energy giant Petrobras has claimed its highest profile victim yet, with the resignation of chief executive Maria das Gracas Foster.
Ms. Foster and five executive directors have now resigned from Petrobras, the company said Wednesday, adding it will meet Friday to select new members of its executive board.
Shares in the company's stock rose 15 per cent on reports that Ms. Foster was being ousted after meeting with Brazilian President Dilma Rousseff. But it does little to check the damage of the scandal, which at this point involves nearly every major Brazilian infrastructure and construction company.
"This appears to be the most severe scandal in Brazilian history, and the adverse effects on the economy are huge," said Claudio Frischtak, an economist specializing in energy issues.
Brazilian police are investigating a fraud estimated to be worth billions of dollars, in which senior managers at companies such as Odebrecht allegedly paid off Petrobras directors in order to obtain contracts with the company. Police say 232 companies are on their list for investigation, and 86 people have so far been charged.
The scandal predates Ms. Foster's time at the helm of Petrobras but she has been widely criticized here for failing to handle the scandal transparently or provide a new sense of leadership. She had promised to make clear exactly how much money was paid in bribes or otherwise mishandled, but has not done so. As of last week, Petroleo Brasileiro SA stock was at an 11-year low.
The enigmatic Ms. Foster is the highest profile woman in business in Brazil, a personal friend of Ms. Rousseff. She grew up in a favela, became an engineer and worked on an oil rig before climbing at Petrobras, where she has spent her career. There has been no suggestion of impropriety on her part, but that would appear not to matter any longer.
"It's impossible to maintain her as CEO as Petrobras – at this moment the government needs to change Graca Foster and everybody in Petrobras, the whole board," Adriano Pires, energy expert and director of the Brazilian Infrastructure Centre, a consulting firm, said before the announcement.
The police investigation into the scandal known as Lava Jato, or "car wash" in Portuguese, rests on the case of a former Petrobras director, Paulo Roberto Costa, who has turned state's witness in exchange for a lighter sentence. In essence, Mr. Costa says that he and other directors were paid millions of dollars from would-be contractors, much of which was funnelled to the coffers of Ms. Rousseff's Workers Party (PT) and other allied political parties.
Last week Brazilian media reported that Montreal-based Bombardier Inc. has now caught police attention for a bond issue in Brazil that involved a convicted criminal named Alberto Yussuf, the key money man in the Lava Jato case, who faces charges of money laundering and participation in a criminal organization.
Bombardier denied any involvement. "We've got nothing to do with this thing," Bombardier spokesman Marc Laforge said in a recent telephone interview. "Unfortunately, we're getting dragged into this because somebody bought bonds from Bombardier. And somebody in a police investigation saw that [that person] bought bonds from Bombardier and our name came out in an investigation. That's how we see it."
Mr. Laforge said to the company's knowledge, it is not being investigated in this case and police conducted no search of its offices in Brazil related to this matter. "[There was] no raid, nothing. We saw our name in the paper. That's what happened."
Mr. Fristchak said the impact on the Brazilian economy is already being widely felt: Many businesses tied to the scandal are highly leveraged and can no longer access the credit they need to operate; and because Petrobras was responsible for about nine per cent of Brazilian growth last year, Lava Jato will affect investment plans for at least three years. But in the long term, a serious confrontation with impunity and entrenched corruption could improve the country's health, he added.
Ms. Foster, who took over as CEO in 2012, initially presided over a period of optimism, as the company sought international partners to finance development of huge offshore oil fields.
The list of rumoured candidates to replace her is topped by Henrique Meirelles, a former president of Brazil's Central Bank.
With a file from Nicolas Van Praet in Montreal