Brazil's state-owned oil giant Petrobras, already accused of graft, is being probed for allegedly over-charging on a gas pipeline contract and using a front company to do so, Globo newspaper reported Wednesday.
Petrobras responded by denying it set up a front firm and insisting the cost of the pipeline linking southeast and northeast Brazil came in only 20 percent above the initial forecast. It said the overrun was "admissible for constructions of this size."
Globo reported Brazil's federal accounts tribunal (TCU) is now investigating the contract drawn up for the 954 kilometer (595 mile) Gasene pipeline.
The project cost 6.3 billion reais ($2.3 billion) overall, with the section coming under suspicion costing 3.7 billion reais, which Globo said represented a surcharge of 1,800 percent based on its trawl through TCU documentation on the case.
The report indicated Petrobras set up a "society of specific purpose" (SPE) which Globo alleges functioned as a "phantom company" -- which the oil giant denied.
The newspaper report added that current Petrobras chair Graca Foster, at the time director of gas and energy operations, signed a document in 2007 calling for the creation of a company, Transportadora Gasene, in connection with the project, while making clear that Petrobras would have full control of transactions involving it.
According to Globo, the chairman of Transportadora Gasene, Antonio de Azeredo, described his position as merely "symbolic."
Petrobras did not comment on Foster's role in the negotiations involving the SPE.
The oil giant, Brazil's biggest company, is already embroiled in an investigation into alleged kickbacks for politicians, mainly allies of the government of President Dilma Rousseff, a former Petrobras chair.
A detained former Petrobras director, Paulo Roberto Costa, says dozens of politicians benefited from hundreds of millions of dollars of kickbacks from inflated Petrobras deals over the course of a decade.
Under the alleged corruption scheme, companies won contracts including illicit surcharges and would pass the cash on to intermediaries who would set up front firms to draw up bogus contracts, services and consultancy services, with the money laundered through those firms.
Police estimate that overall the corrupt network managed to launder around $3.8 billion.