Possible Cartel Scheme in Sao Paulo

Public bidding on government jobs has long been a favorite plot of large and small screen corporate dramas. Now, one is playing out in real life.

Prosecutors in Sao Paulo, Brazil, have been granted the right to launch a criminal investigation into proposed price-rigging during bidding for Sao Paulo’s metro rail systems. This could lead to the uncovering of a cartel scheme.

“Based on documents from CADE (the Brazilian antitrust authority), there are strong indications of criminal cartel formation in bids called by the Sao Paulo commuter rail company CPTM and the Sao Paulo Metro company from 1999 to 2009,” prosecutor Marcelo Mendroni told news sources. “The (price-rigging) scheme involved millions of dollars, maybe billions of dollars.”

There are several international companies reported to be apart of the investigation including France’s Alstom, Spain’s CAF, Canada’s Bombardier and Japan’s Mitsui. The companies participated in public bids organized by the Municipal Government, which would grant the right to operate the subway and train lines. The allegations are that the organizations colluded and there was no real competition when selecting the winner.

The details about the price-fixing come from Siemens executives who are cooperating with authorities to avoid criminal proceedings. This goes along with the CADE internal procedure to verify if these allegations are plausible. On top of that, last week, the Municipal Government was granted access to the procedure on the grounds of expediting the investigation.

Field investigation is being conducted in order to gather relevant information to ensure nothing is overlooked. The nature of crime, however, is making the search difficult as the companies are slow to disclose confidential information.