Odebrecht slashes 97% of suppliers

Determined to convince society that the wrongdoings uncovered by Operation Car Wash are now behind it and recover its market share, Odebrecht Engineering & Construction (OEC) has cleaned up its product and service supplier base. The list of suppliers was slashed by 96.6% since January 2017, when the company’s audit process began.

Since then, number of suppliers fell from 530,000 to 18,000 by mid-July. Of these, 101 are classified as “medium” or “high” risk, according to the company’s methodology, explained Margarida Smith, OEC’s compliance officer since April. Supplier parameters include a series of variables. The criteria include the degree of relationship with government officials, contract value and place of service.

In the same period, the Ethics Line – a channel where employees can report anything from questions on directives to shady activity – received 260 reports, leading to 26 employee terminations, mostly for financial fraud. Of the total reports received in 2017, 3% were related to suspected corruption.

Between January and July, these corresponded to 2% of total reports. In both cases, according to Margarida, these were situations that had been previously reported by employees and, therefore, were covered by the collaboration agreements.

Coming from a financial market background, Margarida is replacing U.S. attorney Mike Munro, who arrived at the construction company in June 2016. Munro, who is internationally recognized for introducing compliance processes to save corporations involved in corruption, was responsible for implementing a world-class program of compliance, ethics and transparency at OEC. He is leaving the company by the end of the year.

To replace him, the monitors responsible for overseeing the company recommended someone who, among other things, spoke Portuguese and Spanish. “We understood that the first cycle of the program was completed. The second cycle depends on closer interaction, which relies deeply on successful communication,” explained Margarida. Another reason for choosing the executive was her close interaction with banks, during a crucial moment for renegotiating outstanding debt. “The company realized that one of the stakeholders of this transformation process is the financial market and, therefore, someone with this background could contribute positively to this new phase.”

Graduated in Economics, Margarida began her career in the sugar and ethanol industry. In 1994 she migrated to the financial markets, where she had her first experience with compliance in 1998. Her first assignment in the area was at ABN Amro Bank. In 2004, she transferred to Citibank, where she led the compliance department for Latin America and Brazil.

In addition to the new supplier base, OEC now enjoys increased control of its participation in bidding processes. The company has taken a stance of pointing out bidding processes that could be tainted or prone to corruption.