Brazil's Petrobras graft probe expanded to top politicians

Staff Writer
Columbus CEO

RIO DE JANEIRO (AP) — An investigation into what prosecutors call the biggest corruption scandal ever uncovered in Brazil won Supreme Court approval to expand to dozens of top politicians for alleged ties to a kickback scheme at the state-run energy company.

In a significant expansion of the probe, the new phase of the inquiry will focus on a former president, the leaders of the house and senate and 51 other figures — but the number is expected to expand as federal prosecutors dig into political ties to the scheme that they say saw at least $800 million in bribes and other funds paid by big construction and engineering firms in return for inflated contracts with Petrobras.

The investigation and any possible trials will take years to play out, but the action throws the young second term of President Dilma Rousseff into further disarray as she faces dueling political and economic crises. She is not being investigated, although she was chairwoman of the Petrobras board for several years as the kickback scheme played out.

Experts say the investigations could create further gridlock in congress just as Brazil and its sputtering economy desperately need fiscal and political reform measures passed. But the investigation is widely viewed as a necessary evil for the nation's democracy to advance and shake off deep-rooted impunity for the rich and powerful.

"You can't put this genie back in the bottle. People are going to have to face the consequences," said Paulo Sotero, director of the Brazil Institute at the Woodrow Wilson International Center for Scholars in Washington. "There used to be the idea that people in positions of power in Brazil were untouchable. They're no longer untouchable."

Federal investigators revealed a year ago that they had started an investigation into the scheme, and efforts until now focused efforts on construction and engineering firms that allegedly paid big money to get inflated contracts with Petrobras. Prosecutors say some of the cash flowed into the campaign coffers of the president's Workers' Party and its allies.

During the first phase of the inquiry, investigators struck plea bargain deals with several "operators" who said they helped move the money around in the deals, along with former top Petrobras executives who admitted raking in hundreds of millions in bribes. That testimony paved the way for the opening of investigations into politicians who allegedly benefited from kickbacks.

Under Brazilian law, the Supreme Court has to approve any investigation of legislators or top officials in the executive branch. Any criminal charges or trials of such figures must also must be approved and judged by the top court.

Among those the court said would now be investigated are former president and current senator Fernando Collor, who was forced from the presidency by a corruption scandal in 1992 before making a political comeback in recent years.

Also to be investigated are Senate leader Renan Calheiros and Eduardo Cunha, who heads the lower house. Both are members of the powerful Brazilian Democratic Movement Party, part of the governing coalition led by the Workers' Party. Both have already shown they are ready to create serious gridlock in congress because of the investigation.

Rosemary Segurado, a political scientist at the University of Sao Paulo, said the two congressional leaders would use the threat of blocking important projects as a "bargaining chip" to pressure Rousseff's government to help protect them. She cited tax, fiscal and political reforms needed as Brazil's economy stalls into recession.

Also on the investigation list are Rousseff's former chief of staff and current senator, Gleisi Hoffman; Rousseff's former Energy Minister Edison Lobao; and Antonio Palocci, who was finance minister under the previous president, Luiz Inacio Lula da Silva, and was Rousseff's first chief of staff.

In an emailed statement, the Workers' Party said that it was "proud to lead governments that have relentlessly fought corruption. It was the governments of Lula and Dilma who have most fought corruption, strengthening the oversight and control agencies and guaranteeing the independence and autonomy of federal prosecutors and the federal police."

The scandal has seriously damaged the reputation of Petrobras, Brazil's largest company. It is responsible for tapping upward of 100 billion barrels of offshore oil found in recent years, wealth that leaders have repeatedly said they view as the nation's "passport" to achieving developed-world status.

But the debt-plagued company is struggling — it was recently downgraded to junk status by Moody's Investors Service and it said this week it would sharply cut back investment and sell off assets.


Associated Press writer Stan Lehman in Sao Paulo contributed to this report.


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