WORKING PAPER DRAFT – PLEASE DO NOT QUOTE OR CITE WITHOUT PERMISSION Prepared for the 66 th PSA Annual International Conference Brighton, 20-23 March 2016 Inside the Car Wash: From the Narrative of a Corruption Scandal in Brazil to a ‘Campaign Finance Quid Pro Quo’ Model FERNANDA ODILLA DE FIGUEIREDO Brazil Institute – King’s College London fernanda.figueiredo@kcl.ac.uk feodilla@gmail.com Abstract In March 2014 a corruption scandal emerged in Brazil with unprecedented political and judicial repercussions. Dubbed the ‘Car Wash’ (Lava Jato in Portuguese), the investigation has uncovered large-scale bribery, kickbacks, and money laundering involving the state-run oil company Petrobras. This paper looks in depth at the mechanics involved in the corruption flows, presenting a theoretical model to discuss the links between campaign finance, state capture, political exploitation, and overcharged public contracts channelled back to campaigns, politicians, parties and senior bureaucrats. Although dozens of high profile politicians and businessmen have now been jailed, one of the major repercussions of this investigation is the Brazilian Supreme Court decision to ban corporate donations to electoral campaigns. Employing what the Car Wash has told us about how corporate corruption works in Brazil, the final part of this paper turns to considering how the sudden absence of corporate electoral donations is likely to play out. Using analytical narrative based on secondary data analysis, such as campaign finance records, government payments orders, and police and prosecutors’ reports, this paper also questions whether this decision has an impact on corruption. It remains unclear whether, and if so how, the banning of corporate donations will work as an effective deterrent of campaign finance fraud. 1. Petrobras: from a darling exception to another politically captured SOE Petrobras, the Brazilian state-controlled oil company, was once defined as ‘the most autonomous and corporately coherent organisation within the state enterprise system’ (Evans 1992:172). Indeed, the Brazilian state-giant corporation used to be referred to as a ‘darling exception’ (Almeida and Zagaris 2015:87) when its performance was compared to the common deficiencies of state-owned enterprises (SOEs), which are often politically captured in order to maximize particularistic interests as well as dragged into distrust because of a lack of efficiency and profitability.