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Petrobras graft leakage could top $5 billion

Rio de Janeiro, Brazil – Fired workers protest at Petrobras headquarters.Corruption losses at Brazil’s state-owned energy giant will likely reach $5.3 billion but could go even higher, a prosecutor said this week.

Petrobras took a $2 billion write down in April for “improperly capitalized additional spending.” But prosecutor Deltan Dallagnol said the losses booked then appear to be “just the tip of the iceberg.”

Executives at Petrobras and several engineering and construction firms allegedly conspired to inflate the costs of Petrobras contracts and skimmed the excess funds.

Dallagnol said his estimate includes losses and illicit profits earned by the engineering and construction firms through overcharging and price fixing.

Petrobras, already the most indebted oil company in the world, has seen its bond rating dropped to junk by both Standard & Poor’s and Moody’s as a result of the scandal.

Petrobras said this month it plans to slash its 2016 budget by about a third — from $27 billion to $19 billion.

The company said it is selling up to $15 billion worth of assets by the end of 2016 to raise cash.

The scandal has already landed several former executives in jail and forced former Petrobras CEO Maria das Gracas Silva Foster to resign.

The allegations have also prompted shareholder lawsuits, including one filed by the Bill and Melinda Gates Foundation Trust. It sued Petrobras and its auditor PwC in federal court in New York, alleging that corruption hurt the share price and caused the Foundation to lose tens of millions of dollars.

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Nicolas Torres is a reporter for Petro Global News, where a version of this post first appeared.

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