Brazil charges 30 executives, some from Bombardier, with price fixing

SAO PAULO – Prosecutors in Brazil have charged executives from a dozen international companies, including Montreal-based Bombardier (TSX:BBD.B), with forming a cartel to raise prices for the construction and upkeep of subway and train systems in Sao Paulo.

The press office of the Sao Paulo State Prosecutor’s Office said Tuesday that 30 executives of the companies involve had been charged.

Names of the accused were not immediately available.

Bombardier declined comment other that to repeat what it said last week when news first surfaced of an investigation into transportation system contracts in five cities.

“Bombardier observes the highest ethical standards regardless of the country where it is based or the business activity it has engaged in,”
the company repeated in an email Tuesday.

“We strongly believe that Bombardier Transportation in Brazil and our employees have always acted in compliance with the laws and our code of ethics. We have fully co-operated with the investigation and intend to continue to do so.”

Besides Bombardier, the companies involved included Germany’s Siemens, CAF of Spain, Mitsui of Japan, Alstom of France and South Korea’s Hyundai Rotem.

The prosecutor’s office charged in a statement that the companies engaged in price fixing and said those that won bids then contracted the losing companies to provide services. Five contacts signed between 1998 and 2008 are being investigated.

Judges must decide if they will accept the charges and try the executives, who included both Brazilians and foreigners.

Alstom said In a statement it had no comment because it had not seen the charges.

Siemens said it has a “zero tolerance posture against any kind of illicit conduct” and was co-operating with the investigations.

CAF, Mitsui and Hyundai Rotem had no immediate comment.

Last week, Brazil’s antitrust agency began legal proceedings against these and other major international companies for allegedly forming cartels for the construction and maintenance of public transportation systems in Brasilia, Belo Horizonte, Porto Alegre and Rio de Janeiro as well as Sao Paulo.

The Administrative Council for Economic Defence, known as CADE, alleged that 18 companies were part of a cartel involved in 15 projects valued at US$4 billion.

CADE said the companies used several anti-competitive strategies such as the prearrangement of offers tendered in bidding processes. At times, it alleged, the cartel would also determine which company would win a bid by allowing only one to tender an offer.

In 2013, Siemens struck a plea agreement with authorities and denounced the existence of the price-fixing scheme, CADE’s statement said.

The companies that allegedly formed part of the cartel will be summoned to present their defence, CADE said. It was unclear when they will be summoned.

The allegations first surfaced last summer when Brazilian politicians threatened lawsuits to recoup public funds that were paid for public transit construction, equipment and maintenance after rising fares and poor service sparked countrywide protests.

— With files from the Canadian Press