Former Manager of Petroecuador is Arrested for Corruption

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The former manager of the public oil company Petroecuador, Álex Bravo, was arrested at his home in Tumbaco, on the outskirts of Quito, on 16 May. To the investigation of influence peddling, a complaint could added for an alleged crime of bribery, according to the Legal Secretary of the Presidency of Ecuador, Alexis Mera.

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At the hearing, the former manager of Petroecuador was accused of benefiting at least three companies connected to his family so that they would obtain contracts with the state-owned oil company. According to the District Attorney’s Office in Ecuador, a service company had obtained 85 contracts, one of which was for USD 35 million. Five of Álex Bravo’s family members, siblings and cousins, worked in this company. A second company entered into 57 contracts, one of which was with the state-owned Esmeraldas Refinery. The sister and the stepfather of the accused work in this company. The latter, also, is the director of companies set up in Panama in Álex Bravo’s name.

The Ecuadorian government cuts ties
Who is Álex Bravo? His rise in Petroecuador was meteoric. It took him ten years, starting at the bottom, to work his way up to be General Manager, at 35 years old. He handled dozens of contracts and hundreds of millions of dollars. In only three years, his declared assets went from USD 24,000 to USD 670,000. Citing personal reasons, he resigned a few days before the investigation portal Focus Ecuador revealed that he had offshore companies in Panama.

As soon as Bravo’s arrest became known, the first to speak out was the Legal Secretary of the Presidency, Alexis Mera: “He is not a political official of this Government (…) before this Government he was an official of Petroecuador, a career civil servant, who over the years worked in the hydrocarbon sector and was appointed president of Petroecuador because of his stability and technical background”. What Mera did not mention is that his appointment as General Manager was decided by Petroecuador’s Board of Directors, which is made up of three political officials: The Minister of Non-Renewable Natural Resources or his delegate, the Planning Secretary or his delegate, and a member designated by the Ecuadorian President.

Consequently, Bravo’s appointment was indeed political, although he really does have a technical background. The hope to avoid this responsibility is probably due to the current situation in which Rafael Correa’s government has the lowest approval ratings in its history and his Attorney General is in trouble because of a mansion that was questionably acquired with the help of the Panamanian firm Mossack Fonseca. But, there are other key points in the Álex Bravo case.

The key: Grupo Azul
According to Focus, until 2009, William Phillips declared less than USD 5,000 in income tax, but only two years later, he declared almost one million. His economic growth can be explained in two words: Esmeraldas Refinery.
Phillips is a Vietnam veteran who dedicates himself to oil businesses. In 2010, the Ecuadorian president awarded him with the National Order of Merit in the grade of Knight, for carrying out “commendable entrepreneurial activity and community service through the activities developed as founder and director of the ‘Grupo Azul’ in oilfield services”. He is married to Mónica Hernández, founder of Banco Solidario and one of the main advisors to the Presidency of the Republic, who is currently in charge of the Family Plan, a governmental initiative on sexuality, which is categorized as ultra conservative.

Worley Parsons International (WPI) is the Australian multinational that was hired to audit the Rehabilitation of the Esmeraldas Refinery, the main crude oil processing plant in Ecuador. On 14 November of 2011, the first contract between WPI and Petroecuador was signed, for USD 38,600,764, to audit and manage the Rehabilitation Program of the Esmeraldas Refinery. Although the contract was signed by Marcelo Robalino, refinery manager of the state-owned company, according to a press release issued by Petroecuador, the person who handled the contract was Álex Bravo.

This is the key contract. WPI subcontracted to Grupo Azul, owned by Phillips, for the audit work. In other words, no contract for the rehabilitation of the refinery was signed without the knowledge and approval of Grupo Azul. In total, Phillips’s company signed five audit contracts for USD 135 million for the Esmeraldas Refinery. The favorite mechanism for the awarding of these contracts: Specific Line of Business, a way of permitting public companies to enter into contracts without tendering.

Some things that WPI did not detect
Among the dozens of contracts that Worley Parsons should have audited is the direct contract between the Sosa Gastada plant, in the Esmeraldas Refinery, and a company with no experience: Oil Services & Solution (OSS), which is owned by Jaime Baquerizo Escobar.

It is now known that Álex Bravo has a business relationship with the contractor of the work, Jaime Baquerizo. Both signed an agency agreement between their offshore companies, Girbra (owned by Bravo) in Panama and Arkdale Investments Limited (owned by Baquerizo) in the Bahamas, as revealed by El Universo newspaper.

But, also, Focus revealed that Bravo and his wife have a stake in five Panamanian companies and at least another three in Ecuador, two of which: Multival and TotalEnergy, entered into contracts with the Esmeraldas Refinery, when Bravo was the main representative. All of this under the watch of and approved by Azul and WPI, the auditors.

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