The Locals of Brazil starts today a new series that we are going to call corruption school. The idea is to show how the most famous corruption schemes of Brazil work. A few of these schemes are very articulate but most are so simple, showing that nothing changes simply because there are no laws of anybody to punish the participants.
We are going to start the recent(2013) payments that building companies in Sao Paulo made to City Hall workers responsible for allowing new buildings and projects in the city. Cases like this in their core are responsible for the high density of the city of Sao Paulo.
On October 2013, an operation coordinated by the Public Prosecutors of São Paulo arrested four municipal employees and dismantled a scheme of embezzlement of Service Tax ( Imposto Sobre Serviços – ISS ) in the state capital. This was just another scandal involving the area of real estate inspections in São Paulo in fifteen years, and the scheme worked as follows: Tax auditors received millions from city builders contractors to abate their tax debts. The corrupt city workers granted to these building companies up to 50% off the total of the due tribute on debts such as the occupancy permits, a compulsory license and tax over every new building in the city. The other 50 % were divided the following way: 30% were destined to the scheme participants, 10% was delivered to agents connected to the scheme that supposedly intermediated the contact between the City Hall workers and the building companies and only 10% would effectively into the coffers of the City Hall. The scheme could have released irregularly over 650 projects in the city of Sao Paulo. Areas with high density but highly desirable areas would get building permits in a very easy way. At least fifteen builders are investigated by the prosecution for payment of bribes – including Brookfield, Trisul, BKO, Alimonti and Tarjab. Of these, only Brookfield admitted having paid 4 million. The gang acted with such aplomb that its members used to register property and luxury cars in their own name, instead of putting them on behalf of other people – and even boasted their possessions on social networks. Photos of boats, houses in luxury condos with golf courses and a guesthouse in the countryside of Rio de Janeiro, valued at 6 million reais, ended up on Facebook pages.
Schemes like this happen all over Brazil and are very easy to operate, since it’s a tax that needs to be paid to the Town Hall for every new construction in the city. Sometimes this tax is very high and hard to get, just so the involved people make it easier to take part in schemes like this and have companies pay. Sometimes there’s no other way around for these companies other than paying it. Ideally, the tax and the building authorization should be done over a study of density, transportation, and other details on the area where the company wishes to build.