Petrobras board to reduce political appointees, member says

By Jeb Blount

RIO DE JANEIRO (Reuters) - State-run Petroleo Brasileiro SA will appoint fewer politicians to its board and bring in more professional members who are respected by investors instead, the oil company's newest director told Reuters on Monday.

Luiz Navarro, 49, a senior consultant with law firm Veirano Advogados in Brasilia, said the federal government has made no demands on how he vote. While non-government investors own most outstanding shares of Petrobras, as the company is known, the government owns a majority of voting stock.

Navarro said he feels free to fight corruption and clean up a contracting process that has helped slash 60 percent off the company's share price in six months, landing Petrobras in its worst-ever crisis.

Named Feb 27, Navarro begins his term later this month. He said he has no political-party affiliation.

"The board of directors will have people from the private sector with a reputation in the market," Navarro said in a telephone interview. "It won't be so dominated by people from the government as it is today."

This change is needed, he said to revive Petrobras' reputation and prevent a price-fixing, bribery and political kick-back scandal from slowing oil, energy and other infrastructure investments.

And while he says Petrobras has implemented many anti-corruption policies in recent years, those policies were not enough.

"You can't just set up a complaint system, you have to effectively investigate the complaints," he said, referring to concerns raised by potential whistleblowers among employees.

Navarro said he would also review complaints by independent board members representing minority, non-government investors.

Two of the three non-government board members have said Petrobras gives them too little information and too little time to study what is disclosed to them. This makes it impossible to evaluate nearly $45 billion a year in investments, they said.

Navarro, when he was a lawyer for Brazil's Federal Controller's office (CGU), helped write the country's 2013 anti-corruption law. He believes a CGU dispute with federal prosecutors over the CGU's right to offer "leniency accords" to construction and engineering firms implicated in the scandal can be resolved.

He said it should not be hard to balance harsh "economic punishment" against finding a way for those firms to stave off bankruptcy by re-qualifying for Petrobras contracts.

"The penalties under the (leniency) accords don't have to be weak, they could contemplate changing ownership," he said. "These companies could be sold to foreign companies."

Individuals remain subject to criminal charges, he said, adding that he hopes prosecutors and the CGU cooperate to approve the accords.

Navarro declined to say if Brazil's oil legislation should be changed to open up investment in a new, offshore oil province known as the subsalt. Many say rules that require Petrobras to take at least 30 percent in future subsalt developments and run all such operations will saddle the company, already the world's most-indebted major oil firm, with even bigger debts.

"Every moment is different, but right now Petrobras needs to focus on generating cash," he said.

The subsalt is a region near Rio de Janeiro with large deposits of high-quality oil trapped far beneath the seabed by a layer of salt.

(Editing by Christian Plumb)