G1 Scrutinizes Bidding Procedure for Construction of Projected F1 Racetrack in Rio

By Richard Mann

RIO DE JANEIRO, BRAZIL – Incorporated only 11 days before launching a bid to build and manage the Deodoro Formula One (F1) racetrack in the West Zone of Rio de Janeiro, winning bidder Rio Motorpark Holding S.A. has a stated capital of only R$100,000 (US$25,000), even though the bidding process required a minimum capital of R$69.7million (US$17.4 million).

José Antonio Soares Pereira Júnior is the president of Rio Motorpark Holding SA, as well as a partner at Crown Assessoria e Consultoria Empresarial S.A, the company responsible for overseeing the bidding process.

Experts heard by Brazilian media outlet G1 say that this indicates a violation of the principles of impersonality, morality, and equality provided for in Article 3 of Federal Law 8.666/93, governing all public bids. Rio’s City Hall and the Rio Motorpark company deny any wrongdoing, but the Federal Public Prosecutor’s Office (MPF) sees evidence of irregularity.

“A bid consultant could never be a business partner of the company that was awarded the bid for a straightforward reason: it had privileged information and used the information to gain an advantage,” said Manoel Peixinho, professor of Administrative Law at Candido Mendes Law Faculty.

According to him, the case may constitute bid-rigging, administrative impropriety, and violation of the principles of the Public Bids Law.

“We are facing one of the greatest corruption cases in public tenders in the city of Rio de Janeiro,” adds Peixinho.

The only bidder in the bidding process was Rio Motorpark. The company’s share capital is R$100,000, according to its filing with the Rio de Janeiro Commercial Registry. This amount is equivalent to less than one percent of the R$69 million minimum share capital required by the bid notice.

According to the experts interviewed in the G1 article, the company should be disqualified from the bidding process due to irregularities, as provided in Article 41 of the Public Bids Law.

The information was taken from public documents collected by G1 from the Federal Treasury Department, the Rio Commercial Registry, the City’s public procurement portal and the city’s Official Gazette.

Rio’s mayorlty states that the bidding was carried out according to the provisions of the public notice as approved by the city’s Court of Auditors.

Moreover, Rio Motorpark claims to have “complied with the applicable legal rules and obtained the approval of the respective regulatory entities.”

The tender provides for the payment of up to R$7.1 million (US$1.8 million) to Crown “related to expenses incurred in the preparation of studies on which the present administrative concession is based.”

Rio Motorpark was granted the right to build and operate a new F1 racetrack on a 4.5-kilometer-long track, on a site ceded by the Army in Deodoro, in the city’s western zone. This concession contract is valid for 35 years and has an estimated value of R$697 million (US$174 million).

Rio Motorpark was created in January of this year, 11 days before the bidding, and was headquartered in the law firm of one of its partners, Luis Fernando Mendes de Almeida Neto.

The site is the headquarters of at least three other companies, according to Federal Treasury Department records. After a visit by the G1 team to the site, the company changed its registered headquarters address to another building in downtown Rio, in an accounting office.

The company has no record of public works or projects known by the market. Even after being declared the winning bidder, it had no website or telephone number.

The Federal Prosecutor’s Office has found indications of bid rigging and submitted a criminal notification to the State Prosecutor’s Office on Friday, June 28th.

The MPF has requested a criminal investigation under the Public Bids Law as it considered that there was a failure to observe all public bid requirements, a too-short bidding period and limited public disclosure, thus hindering access by other bidders.