Friday, September 16, 2016

Brasil's Corruption Probe Tightens Its Noose

Brazil’s corruption probe tightens its noose

Former president Lula da Silva hits back at prosecutors as Petrobras case reaches climax
© Getty
Brazil’s popular former president Luiz Inácio Lula da Silva is fighting for his political life as the country’s sweeping corruption investigation into state-owned oil companyPetrobras reaches a dramatic climax.
Brazilian prosecutors charged the charismatic former leader with corruption and money laundering this week only days after another of the nation’s most powerful figures, the former house speaker Eduardo Cunha, was expelled from congress.
Mr Lula da Silva, who is still the most popular choice for president in 2018 according to recent polls, hit back at prosecutors in an impassioned speech on Thursday in which he broke down in tears on several occasions.
Making little mention of the charges themselves, he spent over an hour defending his legacy and his efforts to help Brazil’s poor, accusing the prosecutors and part of the media of conspiring to end his political career.
“They created a lie, constructed an untruth as if it were the plot of a soap opera,” he said. “If they can prove that I was corrupt, I’ll walk to prison myself,” he added defiantly.
The leftwing ex-president and Mr Cunha, who both deny wrongdoing, could now be brought before Judge Sérgio Moro, the crusading federal magistrate in the southern city of Curitiba overseeing the Petrobras or Lava Jato (Car Wash) case, who is known for making swift and tough judgments.
On Thursday, he condemned a former associate of Mr Lula da Silva, rancher José Carlos Bumlai, to nine years and 10 months prison for corruption in relation toPetrobras.
“The formal termination of Eduardo Cunha’s term in congress by his peers on Sep 12 and the decision … to file charges against former President Lula da Silva two days later has left two of Brazil’s most influential politicians under the heel of Judge Sérgio Moro,” said Jimena Blanco, head of Latin America at Verisk Maplecroft, in a note. 
The stepping up of the Car Wash investigation comes at a delicate time for the new centrist government of President Michel Temer, which is trying to introduce much-needed fiscal reforms to stem a blowout in Brazil’s budget spending. 
Mr Temer is also battling protests by supporters of his former ally and predecessor, former president Dilma Rousseff, also of the PT, who was impeached last month for budgetary crimes. 
The potential removal of two of Brazil’s most influential political players from the field raises uncertainty over the 2018 presidential elections, with few clear candidates on the horizon. 
“Without Lula in the race, the 2018 election looks even more wide open than it already is,” said Eurasia Group in a note. 
Prosecutors on Wednesday sought to paint Mr Lula da Silva as the mastermind of the Petrobras scheme, in which politicians collaborated with former company directors and contractors to extract billions of dollars in bribes from the company. 
Displaying a series of power point graphics, they described how top aides to Mr Lula da Silva from his leftist Workers’ Party, the PT, first orchestrated a scheme to suborn congress when he came to power in 2003. 
Known as the Mensalão, this involved making monthly payments to opposition politicians using money from public funds in exchange for them supporting the PT’s agenda. When this scheme was busted in 2005, many of the same figures turned to Petrobras for illicit funds, the prosecutors said. 
They described how the PT and its former allies, including the Brazilian Democratic Movement, or PMDB, of Mr Temer appointed senior Petrobras executives whose job was to extract bribes and illicit campaign donations from contractors of the company. 
“Lula not only knew about the corruption scheme, he was in command," said Deltan Dallagnol, the federal prosecutor leading the investigation, known as Car Wash, in a press conference on Wednesday. He said he believed Mr Lula da Silva continued to run the scheme after leaving the presidency in 2010. 
The alleged overall Petrobras scheme does not feature in the charges against Mr Lula da Silva, however. Instead, he is being charged in relation to a penthouse apartment in the coastal resort of Guarujá that prosecutors allege was secretly acquired and renovated at great cost for Mr Lula da Silva’s family by OAS, one of the construction groups accused of paying bribes in return for contracts in the Petrobras scandal. 
OAS was also accused of paying a large monthly rent for the storage of some of the former president’s goods in a warehouse for five years after his term ended in 2010. 
Mr Lula da Silva’s lawyers have described the charges as “babble” and say the former president did not own the apartment in Guarujá. 
Mr Cunha, meanwhile, although not yet charged, is facing a variety of investigations over undeclared bank accounts he allegedly held in Switzerland. He has denied holding the accounts. 
Analysts are now poised to see whether investigations into the pair will prove to be the “high point” of the Car Wash investigation or whether expected plea bargains from other key witnesses, such as jailed former construction boss, Marcelo Odebrecht, once one of the country’s most influential businessmen, will produce new leads. 
“I certainly hope the Lava Jato case will not end with Lula,” said Ivar Hartmann, professor at FGV Direito Rio, a law school in Rio de Janeiro.