Another cabinet minister bites the dust
Two incidents probably do not make a trend, but it’s a start. Former president of Transpetro, (a Petrobrás subsidiary) Sergio Machado released what could become his regular Monday audio recording of a telephone conversation regarding Lava-Jato.
This call was to Cabinet Minister Fabiano Silveira, Minister of Transparency and Combat of Corruption. What was released to the TV news did not appear to be particularly criminal but Silveira did seem to be critical of Lava-Jato. That was sufficient to generate all manner of protests in the Temer administration’s legislative base of allies.
Silveira resigned yesterday. That’s two down!
I simply find it incredible that when Sergio Machado calls, people actually talk to him! Why not just say, “Hello Sergio, you called at a bad time. I’m very busy. I’ll call you back.” Then just never call! Machado says he has 6 hours of audio recordings so you can pretty well figure that he is also recording your conversation!
Are those who talk to him really that damned dumb or naive?
The other thing I find at least strange is that there is a Cabinet-level office dedicated to ensuring transparency and combatting corruption. Experience has taught me that ensuring transparency is simply a matter of controls, governance, and compliance (i.e. management) exercised at the proper level of management and independently audited.
Combatting corruption is a police matter for the Judiciary to handle.
I have investigated corporate fraud in Brazil for nigh on 20 years and I’ve handled some pretty “hairy” cases. I have yet to see a case that did not involve some fragrant violation of straightforward and simple control and governance principles. Every one of the frauds could have been avoided or stopped in their tracks with appropriate controls and appropriate management.
As a matter of professional preference, I do not deal with public sector companies. I find them lacking in appropriate controls, procedures, and governance. It usually doesn’t require a lot of imagination to perpetrate a fraud in Brazil’s public sector!
I revert to the lessons of the 18 Century Enlightenment with regard to the underlying reasons for controls. Adam Smith postulated the Man is neither moral nor immoral but rather is motivated by self-interest.
When you go to the shopping center you don’t lock your car because you are necessarily certain that someone will try to steal it or its contents. You also lock it to keep “an honest person honest” and to make things difficult for a dishonest person.
The same applies to applying controls in an enterprise. We do so not because employees are innately dishonest or honest but rather to ensure that they will perform their tasks in accordance with the rules and constraints that keepthem honest and protect the enterprise. And if they violate the rules, they face sanctions. That’s what I call “keeping it simple”.
At the enterprise level combatting corruption is usually a simple matter requiring only proper controls (sign-offs, verifications, audit, etc.) and a robust compliance policy.
Compliance is not simply a matter of ticking the boxes on the document flow. I once had a case in which a major service supplier’s address was a parking lot! Even if all the sign-offs and procedures associated with that service provider were totally in order, the fraud was also "in order"! Nobody had verified the actual physical existence of the provider or if the provider even rendered the contracted service.
That is clearly not the way compliance is supposed to work! The paperwork was totally in order but the provider was not! Someone was responsible for that “oversight”, either by accident or design. “Accidents” should be disciplined and “designs” should be met by dismissal.
At the country level, especially a country like Brazil that requires a coalition of various political parties to govern, the problem is complex but the solution relatively simple. Brazil has a total of 35 political parties (and 35 presumed different ideologies?), and a reputation for bargaining political support on a “quid pro quo” basis often involving graft, kickbacks, bribes, etc. Trying to get the collective support of that many parties is like trying to pick up a turd by the “clean end”!
This is Michel Temer’s dilemma. While he has to satisfy the populace and get the economy in order, he can’t do it without a legislative base. With virtually every political party worried about getting caught up in the Lava-Jato investigations the “quid pro quo” offered to Temer by the parties is to restrain Lava-Jato.
This is contrary to Temer’s solemn promise to the public that he will not inhibit Lava-Jato in any way, shape, or form and will not tolerate attempts to force him to choose between losing what little popular support he currently has or giving in to the demands of the parties in exchange for the policies that will get Brazil back on track and in the offing increase Temer's popular support.
In short, there is simply no “clean end” to grasp, and the landscape is strewn with the turds left by the PT's 13-year use of the playing field.
It’s pretty clear that Sergio Machado’s strategy is to save his own skin by dragging as many members of Temer’s team as possible into the mud. If Temer allows the pressure to build he will find himself facing a serious confidence/credibility crisis.
If I were Temer’s crisis consultant (which I clearly am not!), I would recommend a "bare knuckles" aggressive response strategy.
The first step would be to check with his Cabinet to see just how many members have spoken to Sergio Machado, when and about what.
Any audios that pre-date the break between the PT and the PMDB should be noted.
The next step should be to "de-construct" Sergio Machado. It’s clear that he is seeking only to save his neck from the Lava-Jato noose. Most people repudiate that kind of cowardice and Temer should throw Machado under the bus ASAP!
For those conversations that pre-dated the end of the alliance of the PMDB with the PT the following responses might be prepared:
- At the time of that recording we were an allied party of the PT coalition. That was in the early phases of the Lava-Jato investigation. As the extent of the PT’s corrupt schemes were exposed, we felt that the alliance was no longer in our interest as the party that put together the 1988 Constitution;
- The PT was more strongly opposed to Lava-Jato than were we. In fact, as I wrote in my letter to Dilma, I was left out of the party’s major deliberations, and had become very upset with what I was seeing and hearing. I concluded that it was time to break the alliance;
- The calls recorded by Machado were made prior to the break-up of the alliance when it was the PT that was strongly critical of Lava-Jato and we were allies;
For those calls that occurred after the split or could occur in the future: - Temer needs to tell his cabinet members to simply refuse to talk to Machado;
- And if for any reason that is not possible and the subject of Lava-Jato should surface, the person should say that he/she does not think it proper as a member of an Executive Branch cabinet, to comment on actions of the Judiciary. (Mirroring the same comments made by Sergio Moro.)
- He should also talk to the political patrons of his cabinet appointments to ensure that they “buy in” to the strategy to isolate Machado.
- No one should mention the names of any politicians that come under the scrutiny of Lava-Jato;
- Temer should clearly state that an investigation is not necessarily an indictment and everyone, regardless of position, should be considered innocent until proven guilty. Allegations of a crime are not sufficient to prejudice someone’s career and reputation.
- We are trying to return Brazil to civilized dialog and discussion of our differences, not fan the flames of hateful rhetoric.
In my view, Temer has not been sufficiently forceful in this area. Either he has power or he does not. Against the PT’s thuggish and arrogant rhetoric he cannot afford to transmit any weakness or hesitancy.
He should also avoid creating any ministries that suggest that he is even worried about Lava-Jato (even if he is). And he should not show any fear whatsoever of the likes of Sergio Machado. Throw him to the wolves and forget about him!
That might do it! (Just a thought!)
