Brazil: The Fine Art of Embezzling


Brazil: The Fine Art of Embezzling

The present Brazilian legislation is an invitation to crimes
against the country’s Social
Security Institute. Social
Security Minister, Ricardo Berzoini has instructed his legal
team to present proposals to Congress in order to close
loopholes that nowadays ensure impunity to embezzlers.

by:
Émerson Luiz

 

Corruption and embezzlement cost every year close to half a billion dollars to the Brazilian INSS (Instituto Nacional
do Seguro Social—Social Security National Institute). Past efforts to catch the thieves in the system have been ineffective.
The Lula administration thinks that they found a way to stop the bleeding, though, and has started an assault directly against
the largest embezzlers instead of concentrating, as it was the practice, in the individual trying to illegally get fatter benefits.

The INSS now intends to investigate those companies that keep the money they collect from their employees instead
of passing it to the Social Security system. Social Security Minister, Ricardo Berzoini, who like all of his colleagues in the
Lula cabinet is strapped for money, has adopted the fight against corruption as one of the priorities of his office and as a way
to generate badly needed resources.

In 2001, an audit done by the INSS detected 2.500 fraudulent cases of beneficiaries trying to receive pensions that
were not due to them. These schemes cost the INSS at least US$ 10 million that same year. Many even believe that this
amount is grossly underestimated since, in 2000, close do US$ 30 million in frauds were discovered at the Institute.

A task force comprised of Federal Police agents and INSS inspectors kicked off in Rio to catch these violators has
extended its action now to other states ian federation. It was found that corruption is endemic in the states of Rio de Janeiro and
Espírito Santo, which were responsible for one third of all frauds. The situation in São Paulo wasn’t much better. Close to US$ 1
million was also lost there due to corruption.

In an interview with Rio’s daily, O Dia, Minister Berzoini, admitted that the problem of fraud is worse than people
think and talked about his plans to deal with the situation: "As a first step we decided to step up the work of the task forces
already in place. There is no use in battling the problem in Rio, a critical area, if when we close the siege those who are
defrauding can continue their scheme in places like Curitiba, São Paulo or Porto Alegre. Corruption has spread all over the country."

No Big Shots

Many have criticized the government for having caught and jailed only small fries, public workers who were caught
trying to defraud the system. Berzoini says that that should change soon as the investigations continue: "We are working with a
high degree of discretion regarding this information because discretion is necessary to the investigation. Our objective is to
uncover those big schemes."

Many of the embezzlers do it because they know that there is very little chance they will be caught and a very good
chance they will never have to pay anything since the state has no way to enforce any judgment against them. But this seems to
be changing also given that the INSS started to judicially seize the property and funds of the debtors. This has already
happened to Banerj (Rio de Janeiro State Bank), for example.

Another INSS strategy has been to concentrate the investigation in certain business areas. In São Paulo, for example,
it was created the Construprev, a branch of inspection directed to the construction sector. The INSS has already
uncovered more than US$ 3 billion that were embezzled and it is expected that this amount will increase to US$ 5 billion by year’s end.

But uncovering what’s due it’s just the beginning of the task. You still have to find a way to recover the money.
Since January, prosecutors were able to receive US$ 185 million from debtors, almost 30 percent more than last year when
they were able to collect US$ 152 million. All of this, however, is a drop in the bucket compared to the US$ 27 billion active
debt that exists.

The present legislation is an invitation to crime. Berzoini has instructed his legal team to present proposals to
Congress in order to close loopholes that ensure impunity to embezzlers. One of these loopholes is the proviso that suspends
any punishment for those who "confess" their crime before they are indicted. Strange laws like these exist, according to the
INSS, due to "promiscuity" between the legislators and the companies that finance political campaigns.

Berzoini lamented that his ministry suffered new budget cuts in the last few days. "You feel like sitting on the floor
and crying," he said. According to him, his office’s inefficiency is due not only to lack of resources and personnel, but also
lack of standardization. Says he, "It’s very common today to arrive at an agency with a process and receive diverging
information from workers there. This cannot continue to happen. Some workers are terrified since we uncovered embezzling gangs.
They are afraid they will be subject to auditing if they make any mistake."

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