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Brazil's 'Covaxingate' Investigation Closes in on Bolsonaro and Bharat Biotech

As the vaccine scandal reached the doorstep of Jair Bolsonaro, a Brazil senate panel is considering unlocking the fiscal records of Madison Biotech, owned by Bharat Biotech.

São Paulo: A piece of paper – an invoice – sent by mail from one corner of the world to another could be the smoking gun in the widening investigation into corruption in the deal that may blow to bits the image of an Indian company and sink some top politicians in Brazil.

The invoice, sent to the Brazilian government by an offshore firm of the Indian vaccine maker Bharat Biotech, was the focus of a hearing at the parliamentary commission of inquiry (CPI) on Friday, as the whole country watched the proceedings live with emotions running high in the chamber as well as on social media networks.

The country has been on edge since Tuesday when it a federal deputy, Luis Miranda, alleged that he and his brother Ricardo, chief of the import division at the ministry of health, had met President Jair Bolsonaro on March 20 and alerted him about an invoice of $45 million raised by Madison Biotech, a Singapore-based firm, for advance payment in the $300 million contract between the Brazilian government and Bharat Biotech of India for 20 million doses of Covaxin. The invoice was for for 300,000 doses. As the Singapore company was not part of the contract, Ricardo Miranda refused to clear the invoice, he claimed in an interview, and went to Bolsonaro.

The $15 a dose contract signed by the Bolsonaro government, which had earlier shown little interest in getting vaccines for the country, has become a full-blown scandal with 24×7 media coverage being followed by millions. With explosive leaks coming out almost in real time, a top television commentator called the investigation “CovaxinGate” on Thursday; soon stories about the vaccine were being shared with #CovaxinGate on social media. Some senators have even called it  ‘Caminho das Indias’, or “Passages to India”, sarcastically playing on the name of a hugely popular television soap-opera shown a few years ago. With eight out of 10 people in the country supporting the CPI proceedings, people have been anxious to know if there was corruption in the deal.

Bolsonaro in the dock

In the past week, the senators leading the probe have appeared confident that Madison Biotech’s invoice is the piece of evidence that will lead to a trail of tax evasion, money-laundering and bribery in the deal between Brazilian government and the Indian firm, represented here by a local company, Precisa Medicamentos.

On Friday afternoon, tension gripped the country when Ricardo Miranda, his hair disheveled and sweat on his forehead, walked into the senate through a corridor used by emergency services. Dressed in a blue shirt and looking visibly tired, the health official quietly settled into a chair next his brother and Senator Omar Aziz, the president of parliamentary commission, at a tense hearing which often turned into a shouting match. But the Miranda brothers came prepared with a power point packed with slides of invoices, emails and WhatsApp messages to prove that they had discussed the issue among themselves and gone to the president. While Ricardo pressed his case for not authorizing the invoice as the Singapore entity was not a “party to the contract”, Luis Miranda pushed his case against the president for not “acting in public interest” on their complaint, which is an impeachable offence. Before the end of the session on Friday night, Luis Miranda dropped a bombshell that has put Bolsonaro in quite a tight spot.

In his presentation at the senate on Friday, Brazilian health ministry official Ricardo Miranda stuck to his story that he refused to sign an invoice of $45 million from Madison Biotech as the company was not part of the contract.

An evidence of crime is what CPI has been looking for since it began in April. At the senate hearing on Friday night, the mood turned dramatic when Luis Miranda was pushed by senators about the details of the brothers’ meeting with the president. As he had claimed that Bolsonaro referred to the name of a politician he suspected of corruption in the Covaxin contract, senators asked him to reveal the name. Amid tears and a choking voice and after much persuasion, Luis Miranda revealed that Ricardo Barros, the leader of government in the federal Chamber of Deputies, is the name the president cited. “I’m going to call the director-general of the Federal Police because, in fact, Luis, this is very serious,” Luis Miranda said on Friday, claiming this is what Bolsonaro had told him on March 20.

Also read: Brazil Probe on Covaxin Deal Turns Focus to Offshore Payment to Bharat Biotech ‘Partner’

Barros, a former health minister, too, has been under the scanner for bringing a bill in the Congress that allowed Brazil to grant “authorization for the import and distribution of any vaccines “, thus allowing the import of Covaxin which has not been approved by the country’s drug regulator till now. In a tweet after the hearing, he said that he had no involvement in the Covaxin deal and that the investigation would establish this.

Luis Miranda dropped a bombshell at the commission by revealing the name of the politician who Bolsonaro suspected of corruption in the deal. Photo: A screengrab from TV Senado

The bombshell revelation by the federal deputy at the CPI, where lying has serious legal implications, was an earth-shaking moment. Close to midnight, after the session ended, Senator Renan Calheiros, the CPI rapporteur, attacked Bolsonaro for not ordering a police investigation despite being “informed of the scandal”. Calling it a historic day, Senator Rodrigues said that the probe is closing-in on Bolsonaro. “Today, all the elements of a crime committed by the president were presented here. He did not take the necessary steps to open an inquiry and he did not take the necessary steps to stop the continued crime… We will be proposing to inform the Supreme Court about it,” said the senator, addressing the media at the end of the day.

Past midnight, #CovaxinGate was trending on the Brazilian social networks, with memes, jokes and calls for protests this weekend. “We didn’t know Covaxin was so strong that it could get rid of Bolsonaro,” read a widely-shared joke.

A smoking gun 

The Covaxin story has become a big problem for Bolsonaro, whose approval rating has fallen to 23% while his rejection rate is as high as 50%. According to an opinion poll released on Thursday, if the presidential election is held today, Bolsonaro would lose to former president Lula da Silva in the first round itself. Rattled by the growing scandal, Bolsonaro, not known for niceties, has been seem shouting at young female reporters and pulling masks from the face of children at crowded gatherings – a sign of not being in control.

Also read: US FDA Denies Emergency Use Approval to Bharat Biotech’s Covaxin

But the suspicion of corruption in the Covaxin deal portends big trouble for Bharat Biotech, too, which wanted to introduce its vaccine in a big market like Brazil to show its – and India’s – biomedicine prowess. Both the partners of the Indian firm – Precisa Medicamentos in Brazil and Madison Biotech in Singapore – are now under the scanner. While the head of the Brazilian company, Fabiano Maximiano, will appear before the senate next week, the commission may initiate some proceedings against the Singapore firm next week.

Bharat Biotech in eye of storm

The Brazilian representative of Bharat Biotech has been on the radar of senate investigators for some time as they pursued the high cost of the Indian vaccine. But the story took a dramatic turn on Tuesday after Ricardo Miranda told O Globo newspaper that he had refused to clear the Madison Biotech’s invoice as it had not signed any contract with the Brazilian government. The revelation raised suspicion that it was an offshore entity being used for tax evasion. The brothers were immediately asked to depose at the senate.

Millions of people watched Ricardo Miranda’s testimony live on Friday. Photo: A screengrab from TV Senado.

On Tuesday evening, the government launched a frontal attack on the Miranda brothers, accusing them of “tampering with the invoice” and misleading the president. At a press meet, Onyx Lorenzoni, the chief of presidential secretariat claimed that there was no third company involved in the deal. “Madison Biotech is nothing more than a subsidiary of Bharat Biotech, located in Singapore, responsible for all of Bharat Biotech contracts in international trade,” said Lorenzoni.

To support his claim, Lorenzoni presented a “Letter of Declaration” from the Indian company which said that two companies “entered into a Supply Agreement” and all “channel partners and entities are requested to accept Invoice raised by” Madison Biotech. But the undated letter doesn’t say that the Singapore entity was a subsidiary – fully- or partially-owned – of the Indian firm and when did the two companies entered into an agreement. Lorenzoni also didn’t bother to clarify if Madison Biotech was part of the contract and who owned the company that operates from a two-story house whose address it shares with several other companies.

Lorenzoni accused the brothers of “tampering” with the invoice and threatened that the government would order an investigation into their “fraudulent claims” in an aggressive tone, which was seen by the senators as an attempt by the government to “scare and coerce the witness” from not appearing at the senate probe. But on Friday, Ricardo and Luis Miranda repeated in front of the commission and the whole country what they had told the Brazilian media.

The offshore company, its relationship with the Indian pharma giant and its Brazilian representative and their business activities are now the focus the senate probe. In an important revelation on Friday morning, the Brazilian website UOL reported that Madison Biotech has close links with Bharat Biotech. By accessing the company’s commercial registration with the regulatory body of business entities in Singapore, the website reported that among three people listed as directors of Madison Biotech is Krishna Murthy Ella, the founder and president of Bharat Biotech. Another two directors, said the report, include the name of Raches Ella, a US citizen who led the Covaxin clinical trial, and Krishnamurthy Sekar, who is a Singapore citizen.

The Singapore connection 

There is nothing irregular 0r illegal for a company to have an offshore entity. But the details about Madison Biotech’s structure and operations have made the Brazil probe quite suspicious about it. According to the information on the website of the Accounting and Corporate Regulatory Authority (ACRA) of Singapore, the company was created on February 14, 2020, with an initial capital of 1,000 Singapore dollars ($750). The only partner listed on the company’s commercial record is an Indian veterinary laboratory, which is also owned by the founder of Bharat Biotech. One of the company’s registered at 31, Cantonment Road, Singapore, is called Sphaera Pharma whose director also happens to be Krishnamurthy Sekar, who joined Madison Biotech on November 12, 2020. In the invoice in the eye of the storm the signature appears to read “K Sekar” just above “signatory authority”, though it doesn’t carry a name.

The ongoing investigation and its rolling media coverage has done severe damage to the image of the Indian company.

While The Wire‘s questions to Krishna Ella of Bharat Biotech went unanswered, the Hyderabad-based company issued a statement Friday denying any wrongdoing, several hours after UOL had published the details establishing a direct link between Bharat Biotech and its offshore entity. “Over the past 25 years, Dr. Krishna Ella has founded or acquired more than a dozen companies. This includes Madison Biotech, from the Bharat Biotech group, a company he founded in 2020 for global sales and marketing of vaccines and R&D [research & development],” said a statement that the firm’s PR representative emailed The Wire. “We strongly refute and deny any kind of allegation or implication of any wrongdoing with respect to the supply of Covaxin.”

Its clarification notwithstanding, Bharat Biotech, and its owner, may be in for more trouble in Brazil. On Thursday, the vice president of the senate panel, Senator Randolfe Rodrigues, moved an application to the committee’s board to break open Madison Biotech’s fiscal records. “It’s a company that is headquartered in a tax haven and asked for a payment of $45 million in advance,” the senator said in a request to CPI president. “Some measures are needed that I am forwarding to this Parliamentary Commission. First, the unlocking of bank records of this offshore company. The unlocking of its fiscal secrecy, if they have operations here in Brazil because we have information that there are operations of this company also in Brazil, despite being offshore,” said Senator Rodrigues in his request.

The request to open the Singapore firm’s records will come up for consideration next week. According to sources in Brasilia, after Friday’s testimony by the Miranda brothers, the probe will go after the company with full force. Bharat Biotech’s local representative, which actually signed the contract with the health ministry, is already facing at least four different investigations for the price negotiated for each dose of Covaxin and the manner in which the contract was negotiated. In addition to the CPI probe, it is also being examined by the Federal Court of Accounts, the Comptroller General of the Republic and the Federal Prosecutors who say they have seen some “evidence of a crime” in the case.

Shobhan Saxena and Florencia Costa are independent journalists based in São Paulo, Brazil.