Tecumseh Joines Whirlpool In Brazil Fed Investigation
February 19 2009 - 7:45AM
Dow Jones News
International compressor maker, Tecumseh (TECUA) said from its
U.S. office late Wednesday that it has been subpoenaed in a new
international investigation into an ongoing cartel running the
multi-billion dollar refrigeration compressor industry.
The investigation began with the public prosecutor in Sao Paulo
state, Brazil. Investigators there, coupled with a total of 60
federal agents, searched the offices of Tecumseh competitor
Whirlpool (WHR) late Tuesday. The agents left with bags full of
computers, laptops and other archival material.
Federal authorities said Wednesday that they would not comment
on an ongoing investigation.
Whirlpool said it was cooperating with the federal police,
Brazil's version of the Federal Bureau of Investigation.
Two managers at Tecumseh in Brazil said they were not aware of
the company being served subpoenas.
Federal authorities swept through Whirlpool's Sao Paulo and
Santa Catarina state offices Tuesday in an operation called Zero
Grau, or Zero Degrees, with the objective to find evidence of a
global cartel in the selling of hermetic compressors for
refrigeration. The compressors are used in household refrigerators
and freezers, as well as commercial vending machines and water
coolers.
The investigation included Whirlpool and Tecumseh offices in
Europe, the U.S. and Brazil.
It is unclear whether or not an ex-employee from Whirlpool,
Tecumseh or Panasonic's Matsushita was instrumental in opening the
federal investigation.
A public relations firm handling Panasonic do Brasil Ltda said
that the Brazilian subsidiary, and its headquarters in Japan, have
not commented yet on the subject, or whether they were
subpoenaed.
If charged, managers from the company, or companies, involved
with aiding and abetting in the cartel can get as much as two to
five years imprisonment, with fines charged to the corporation
ranging between 1% to 30% of the company's gross revenue.
Individuals charged with the anti-competitive crime are required to
pay between 10% and 50% of the charge levied on the
corporation.
Brazilian authorities said in a press release that a price
fixing scheme was in place for nearly 12 years.
Brazil sells around 10 million compressors yearly, at prices
ranging from 70 Brazilian reals ($30.43) and BRL800 per unit.
Local press reported Wednesday that 2008 losses from the
cartelization of hermetic compressors could be on the order of
BRL125 million, or $425 million.
Whirlpool's compressor business, also known as Embraco, is worth
around $1.5 billion annually.
Brazilian anti-trust authorities have been pressing ahead with
its anti-cartel program since 2003. As a result, the number of
search warrants has increased from around 11 in 2005 to 19 in 2006
and 84 in 2007. Less than half of those warrants resulted in an
arrest.
Company managers that come forward to denounce cartelization are
granted immunity.
One of the more recent cartel cases in Brazil involved three
privately held mining companies. Federal police investigators
uncovered the illegal practices in 2005 and the three companies
were fined three years later as much as 22.5% of their 2005
revenues.
-By Kenneth Rapoza, Dow Jones Newswires;5511-8812-5961;
kenneth.rapoza@dowjones.com