A DCNS Scorpene submarine, similar to the ones ordered by Brazil, operated by Malaysia

Brazil-France submarine programme investigated for fraud

A Brazilian military submarine programme in partnership with French shipbuilder DCNS is under investigation for potential fraud.

The joint venture between the French firm and Brazilian engineering and construction conglomerate Odebrecht involves five submarines due to be built at a Navy base on Sepetiba Bay, south of Rio de Janeiro, including a nuclear-powered one due to be completed by 2023 for a total of €6.7bn (£4.7bn).

The deal was agreed in 2008 by former President Luiz Inacio da Silva's government, but newspaper Folha de S. Paulo says police searched for documents that could prove their suspicions of fraud in the programme.

The newspaper did not say how it had obtained the information and federal police did not respond to a request for comment.

According to Folha, there was no competitive tender process when DCNS subcontracted part of the work on the submarines to Odebrecht, whose chief executive and other senior executives were indicted this month on corruption charges for alleged fraud on contracts with state-run oil firm Petrobras.

There is no indication that the state-backed French shipbuilder, which is 35 per cent owned by French defence group Thales, was being investigated. A DCNS spokesman had no immediate comment.

Odebrecht said in a statement it did not have knowledge of any search or seizures related to the submarine development programme and that only Brazil's Navy could release information about the programme. The newspaper conceded that any investigation could prove difficult to carry out because it involved a matter of national security.

The search was reportedly part of a wider probe that led to the arrests on Tuesday of two executives from state-run utility Eletrobras' Eletronuclear division, which is building a nuclear power reactor near Rio de Janeiro, expanding a corruption scandal previously focused on Petrobras.

The investigation that began in March 2014 has led to jail for some of Brazil's most senior engineering executives and caused Petrobras to write off more than $2bn in corruption-related losses.

On Tuesday, police carried out raids at five engineering firms that belong to the consortium building the Angra 3 reactor, including Odebrecht.

Dozens of lawmakers, mostly from President Dilma Rousseff's governing coalition, have also been implicated for allegedly taking bribes in the kickback scheme, which has spiralled into Brazil's largest corruption scandal.

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