BRASILIA- The majority owners of Colombia's Avianca Holdings AVT_p.CN , brothers German and Jose Efromovich, were arrested on Wednesday as part of Brazil's sprawling Car Wash corruption probe, according to a source briefed on the matter.
The brothers allegedly paid bribes to get a ship-building contract from Transpetro, a logistics unit of Brazilian state-run oil company Petrobras, the source said.
The arrest is the biggest headache for the pair, whose airlines once thrived but have in recent years floundered. Their Avianca-branded subsidiaries in Brazil, Argentina and Peru have all folded since last year, while the Colombian carrier is going through bankruptcy restructuring.
The Efromovich brothers once built the second largest airline business in Latin America, large enough to lure United Airlines Holdings UAL.O in 2018 to seek a partnership with Avianca.
To get the partnership, United lent the Efromovich brothers' holding company almost $500 million. The U.S. carrier has since written off that loan.
The brothers have also enjoyed a close relationship with Elliott Management, the activist hedge fund.
German Efromovich could not be reached for comment. He did not respond to a text message on Wednesday morning.
The Efromovich brothers initially built their fortune through contracts with Petrobras and other oil companies in Rio de Janeiro, using those profits to buy Avianca out of bankruptcy in 2003.
Corruption allegations against the Efromovich brothers have long been circulated in the press, notably that their shipyard company Estaleiro EISA benefited from many Petrobras contracts in the 1990s.
(Reporting by Ricardo Brito, writing by Stephen Eisenhammer Editing by Bernadette Baum) ((stephen.eisenhammer@thomsonreuters.com; +55 11 5644 7726;))
