Brazil Corruption Probe Spreads to Eletrobras

SÃ O PAULO—A Brazilian judge ordered the arrest of two people and issued 23 search-and-seizure orders as the anticorruption investigation known as Operation Car Wash spread to state-controlled electric utility Eletrobras.

The country's federal police are investigating allegations of wrongdoing at the nuclear-generation unit of Centrais Eletricas Brasileiras SA, the full name of Eletrobras. The electrical energy company, Latin America's biggest by revenue, controls power generation, transmission and distribution companies throughout Brazil.

The federal police said in a statement that they carried out the arrests and seizures Tuesday morning.

Federal prosecutor Athayde Ribeiro Costa said the men arrested were Othon Luiz Pinheiro da Silva, a former president of Eletrobras unit Eletronuclear, and Flavio Barra, an executive with the energy area of construction firm Andrade Gutierrez. Mr. Costa alleged that Andrade Gutierrez paid bribes to Eletronuclear's former executive. Both companies declined to comment on the arrests, and lawyers of both executives weren't able to be reached for comment.

An Eletrobras spokesman said Tuesday that the company is investigating irregularities but so far hasn't found any signs of wrongdoing.

Authorities are investigating what they say may be a possible illegal cartel involved in the construction of a nuclear power plant, known as Angra III, which was overseen by Eletrobras's Eletronuclear unit. Construction of the plant, which was expected to generate 1,405 megawatts of power a day, began in 1984, but it was suspended after six years because of a lack of financing.

The government restarted the project in 2010, with construction expected to finish in 2018.

The so-called Operation Car Wash began last year to investigate allegations of overcharging in contracts signed by state-run oil giant Petró leo Brasileiro SA, or Petrobras, and certain construction companies. The investigation has spread to other state-run firms.

Authorities allege that the construction companies formed a cartel to drive up the price of contracts with Petrobras, kicking some of the windfall back to politicians, political parties and former executives at the oil company.

Earlier this month, Eletrobras created an independent commission to oversee an investigation by international law firm Hogan Lovells about possible irregularities that may violate the U.S. Foreign Corrupt Practices Act and the Brazilian anticorruption law, along with the company's code of ethics.

Write to Rogerio Jelmayer at [e-mail]

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