World’s volleyball president at risk of losing his impunity
FIVB president, Ary Graça, may have less to smile about after the public prosecutor in the Brazilian state of Rio de Janeiro has indicted him in a case about tax fraud, money laundering and other crimes. Photo: Alexandre Schneider/GettyImages.
09.07.2021By Lúcio de Castro
It was 6 a.m. in the morning of 20 May 2021 when a team from the civil police and the public prosecutor's office in the state of Rio de Janeiro broke down the door of a two-story penthouse with stunning ocean views on Avenida Delfim Moreira, in the neighbourhood with the most expensive square meter in Brazil.
With live broadcast on the main national television networks and great public repercussion, the "Operação Desmico" (ironically named after a feint play common in volleyball), arrived at the sophisticated address.
The police entered the residence of Ary Graça, the president of the International Volleyball Federation (FIVB). And they came more than seven years late.
The first appearance of Ary Graça's name in connection with a scandal of corruption and embezzlement of public funds from the sponsorship of the state-owned "Banco do Brasil" for the Brazilian Volleyball Confederation (CBV), was on February 2, 2014.
Since then, there have been several reports going deeper into the allegations in an investigative journalism series called "Dossi Vólei" that continued for years, always with new revelations and facts.
The initial reports showed a repeated modus operandi, with the same nucleus of people and one single head: Ary Graça, president of CBV through 17 years, between 1997 and 2014.
In the last two years of this mandate, between 2012 and 2014, he simultaneously entered the presidency of the International Federation of Volleyball (FIVB), to which he was elected for the first time on September 21, 2012. His departure from CBV coincided with the outbreak of the first scandals.
The scheme exposed in 2014 worked like this: Two companies, opened by people close to Ary Graça and both loyal henchmen in the confederation, received a commission from CBV for taking part in the negotiation of the millionaire sponsorship contract from the Banco do Brasil, as if they had provided a consultancy service.
One of the henchmen was Fábio Azevedo, Graça’s current right-hand man as Director General of the FIVB.
Each of these companies agreed to a contract worth about two million US dollars for this type of "consultancy", adding up to a total of about four million US dollars paid to these two companies.
However, as was demonstrated in the journalistic reports and later by the federal investigators, these companies did not provide a service for the immense remuneration.
The negotiations between the CBV and the state sponsor were done directly. The companies that received a commission for "consulting" on the sponsorship were not recognized by the Banco do Brasil as having participated in the negotiations.
A public investigation confirms the journalistic reports about fraud
But there was more to Graça’s dealings as CBV president.
In the same year, 2014, the Office of the Controller General (CGU), a federal oversight body responsible for investigative actions related to public assets, management transparency, and audits of government institutions, conducted a lengthy investigation based on the journalistic reports.
In December 2014, the CGU published the findings of its audit.
It definitively proved the journalistic reports and went beyond that, demonstrating also a series of irregularities in Ary Graça's management at CBV involving public money coming from sponsorship.
In a 55-page report, the CGU concluded the following about the relationship between Banco do Brasil and CBV during Ary Graça's administration. The report showed that Ary Gracy
- contracted, through CBV, consulting companies without proof that they provided any services
- hired companies without staff and physical structures, often companies with addresses in residential neighbourhoods or appearing on private addresses
- hired companies whose owners were or are linked to the CBV
- contracted companies whose owners were responsible for both providing the service and supervising it
The report also showed
- the existence of invoices that showed that some of these companies had the CBV as their only client, and in some cases they were established right up to the signing of the contract with Banco do Brasil
- the payment of invoices with only generic descriptions of the contracted service such as ‘commissioning’ or ‘advisory’
Despite being forceful and containing detailed evidence, the CGU report did not have legal consequences and those involved went unpunished.
In the national congress, the sports commission of the House of Representatives opened an investigation into the case. It did not go any further.
A private audit found several other irregularities
A private audit was also contracted after Ary Graça left the presidency of CBV at the end of 2014.
PWC who was responsible for carrying out the audit reached the same conclusions as the CGU and found several other irregularities.
The PWC audit found a total of seven companies that provided services to the management of Ary Graa in CBV with "internal control weaknesses". According to PWC, these seven companies moved a total approximately US$ six million.
Points raised by PWC include:
- They would not recognize that there were any intermediaries preparing CBV's contracts with Banco do Brasil.
- Contradictory dates in the contracts signed and in procurements granted by CBV
Financial report about atypical and unjustified transactions
In addition to the reports of the CGU, the internal audit of PWC, the journalistic reports of the "Dossi Vólei" also resulted in a "Financial Intelligence Report" (RIF), which was conducted by the Conselho de Controle de Atividades Financeiras (COAF), an agency of the Internal Revenue Service that has the power to break the bank secrecy of those involved, in this case, the then leaders of CBV.
The COAF report pointed to:
- Vast and repeated cash withdrawals in high amounts
- Financial transactions that are incompatible with information about income
- Financial transfers to third parties without justification, e.g. companies of relatives and people linked to the CBV
- Indications of atypical transactions.
Two cases involving Graça described in plea bargain
Ary Graça and the irregularities in his management were not only cited in the above reports. As part of the huge national anti-bribery action “Operation Car Wash”, a plea bargain for the suspect Marcos Valario, who is serving time in a federal prison, described two cases involving Ary Graça and the sponsorship of the Banco do Brasil for CBV.
Valario claimed that part of the sponsorship money was deposited legally while the other part was packed in suitcases of money that left the capital Brasília and were taken to Ary Graça's residence in Rio de Janeiro.
"During the bank sponsorship, CBV had a part that was legally delivered by deposit into an account and another part in cash, which, according to the bank's board of directors, went to CBV's president, Ary Graça," it is stated in the bargain plea with the federal police.
Despite all these proofs, evidence, and enormous repercussions that the "Ary Graça" case had in Brazil, it did not result in major consequences for his role as president of the FIVB.
Indictment from the state public prosecutor
Suddenly this year, when the accusations against Ary Graça seemed to be forgotten, the "Operation Desmico" was carried out by the civil police and the Ministry of Public Affairs of the state of Rio de Janeiro.
The action was based on a 156-page document from the Rio de Janeiro state public prosecutor's office that included several elements already cited in journalistic and agency reports.
In its conclusion, the indictment speaks of "criminal organisation, aggravated theft, concealment of assets, crimes against property, various forgeries and money laundering crimes.”
The big new fact in the new indictment involving Ary Graça and described in "Operation Desmico" is tax fraud.
According to the investigation, a criminal tax fraud scheme was set up in Saquarema, in the so-called "lakes region" of the state of Rio de Janeiro. One of the parties was commanded, according to the Ministry of Public Affairs of Rio de Janeiro, by the former mayor of Saquarema, Antonio Peres, who allegedly opened two fictitious companies in the city. And these companies also lent their addresses to those who wanted to obtain tax benefits.
Among the companies using the address of the mayor's company were “SMP Logica e Servicios” and “SMP Sports Marketing e Promotion”, owned by the former superintendent of CBV, Marcos Pina, who is also mentioned in previous investigations as a one of the beneficiaries of CBV contracts.
Also associated in what is called a "criminal scheme" of tax fraud are the companies of the S4G Group, (“S4G Gestão de Negios” and “S4G Planejamento e Marketing”), owned by Fabio Azevedo, former director of CBV and today Director General and right-hand man of Ary Graça in the FIVB. Like Marcos Pina, Fabio Azevedo was one of the beneficiaries of the contracts with CBV under Ary Graça.
The complaint also highlights the close relationship between Ary Graça and the mayor of Saquarema at the time, Antonio Peres. The same mayor that in 2002 donated a city-owned land plot of 93,000 square meters for CBV to build its training center and where it still prepares for competitions.
According to the Ministry of Public Affairs, the tax fraud involving the former mayor and the former leaders of CBV worked like this: The city government granted tax benefits to companies based in the city of Saquarema below the constitutionally established level, thus fostering the creation of several "ghost" companies in the city.
The move should promote a large (and irregular) increase in the municipality's revenues. But it became a true tax evasion, since the companies that falsely declared the address of their head offices in Saquarema stopped paying municipal taxes there, with great losses to the city's coffers.
In this way, the companies opened by Marcos Pina and Fabio Azevedo to exploit contracts with CBV, stopped paying high taxes in contrast to the law of Saquarema.
Once the accusation that the companies of Fabio Azevedo and Marcos Pina were defrauding the tax system was made, the Ministry of Public Affairs went back in time to identify where their income came from and found the scheme already revealed in previous years and run by Ary Graça.
Increases in the personal wealth of former CVB leadersAnother new fact was the breaking of the bank secrecy of all those involved through which the civil police of Rio de Janeiro and the Ministry of Public Affairs concluded that there was a substantial increase in the personal wealth of the former CBV leaders, especially in the years between 2010 and 2013. This period coincides with the signing of contracts between CBV and companies run by CBV leaders.
In the case of Ary Graça, the breach of bank confidentiality revealed significant amounts spent in financial investments, inside and outside Brazil, in the magnitude of approximately two million US dollars. It also registers the acquisition of a speedboat worth USD 700,000 and several works of art.
At this point, the indictment warns that the purchase of works of art is one of the most commonly used methods for laundering capital for subsequent integration of these values into the market, creating the appearance of legality.
The part that deals with the theme is narrated as follows:
"It should be emphasized that the period with the highest percentage of movement higher than the declared income of the accused coincides with the years of greatest expansion of the criminal organisation, as described above, which further corroborates that the revealed amounts are linked to crimes committed by the criminal gang."
Graça maintains his innocence
Still, Ary Graça insists he is innocent. On 21 May, his lawyers issued a press release claiming that years of investigations had been carried out “without finding any illegality, confirming the effective provision of paid services, absence of overpricing or any other crime.”
It is true that much of the content of the accusations was known to everyone for years, but a new fact is the tax issue. Another point can complicate Ary Graça's life: For the first time since the scandals surrounding the figure of the president of the FIVB exploded, there was a search and seizure operation at the Brazilian residence of the leader. Computers were seized, as well as objects and notes that may contain important secrets.
It remains to be seen if Ary Graça felt so confident after enjoying impunity for seven years, that he did not bother to get rid of secrets in his files. The bank records and everything else investigated so far are no longer possible to throw overboard.
For international sport, the question remains that has persisted for years: In the face of so many accusations, based on documents and reaffirmed in various instances of investigation, how is it possible to reach and remain at the head of an institution the size and importance of the FIVB?
The Ary Graça case is yet another corruption charge that points to the obvious: The international sports bodies continue to have immense and inherent problems in accountability and a terrible deficit of transparency and democracy.
Lúcio de Castro is a Brazilian investigative journalist working previously for ESPN and now for Agencia Sportlight