Brazil's Petrobras tightens supplier management

RIO DE JANEIRO, July 31 (Xinhua) -- Brazil's state oil and gas giant Petrobras announced on Friday that it has made its supplier management process stricter.

From now on, the company said, in order to work with Petrobras, suppliers will have to "provide detailed information about their structure, finances and mechanisms for compliance and combating fraud and corruption, among other items, which are evaluated through a process called Integrity Due Diligence."

"The aim is to make the procurement of goods and services more secure and mitigate risks regarding fraud and corruption," Petrobras said. "The company has been implementing measures to ensure that only suppliers with proven compliance and integrity mechanisms remain in Petrobras' registry and can participate in competitive tenders."

Petrobras is suffering a major corruption scandal which has been investigated for over a year. It was discovered that private companies paid hefty bribes to a number of Petrobras directors in order to get lucrative contracts with the oil giant.

Several former Petrobras directors as well as a number of high executives from some of Brazil's largest construction companies have been arrested. Connections between participants of the corruption scheme and politicians and political parties are being investigated.

Petrobras has so far managed to recover large sums embezzled by its former directors - 139 million reais (40.6 million U.S. dollars) in July and 157 million reais (45.9 million U.S. dollars) back in May.

The company said reviews of suppliers' status are underway as the Federal Police carries on with the so-called Lava Jato (Carwash) Operation which investigates the corruption at Petrobras. Companies on the supply chain had their activities suspended by courts.

"At the same time, the company is evaluating suppliers whose contracts are in the renewal process or who have applied to join the corporate registry. New contracts will be signed with suppliers that are authorized under the new integrity analysis model," Petrobras said.

According to Petrobras, companies that remain in the supplier database will give it authorization to audit their integrity systems and anti-fraud and anti-corruption mechanisms.

Petrobras also said it is improving its internal controls and limiting individual decisions at all levels of the company and promoting collective decisions. Two new committees - Strategy and Finance - have been created to advise the Board of Directors. The company used to have three committees with this function, namely, Audit; Safety, Environment and Health; and Remuneration and Succession.

Petrobras has also established a Disciplinary Committee "in order to create stricter penalties for employees involved in breaches of Petrobras' rules."

"This committee's role is to ensure that punishments imposed on company employees are appropriate given the gravity of the irregularities. The committee is also tasked with punishing managers who fail to investigate or punish their subordinates," Petrobras said.