Brazil's Rousseff moves to limit damage from Petrobras scandal

Reuters News
Posted: Sep 08, 2014 6:36 PM

By Anthony Boadle

BRASILIA (Reuters) - President Dilma Rousseff sought to shield her re-election bid from a new scandal at state-run oil company Petroleo Brasileiro SA by asking prosecutors on Monday for any details involving officials in her government.

Brazilian magazine Veja reported on Saturday that a jailed former executive at Petrobras named Energy Minister Edison Lobao and two dozen other politicians as people who received kickbacks from the company's contracts.

The scandal threatens to further complicate Rousseff's chances of winning a second term in October in a tight contest, with polls showing her behind environmentalist Marina Silva in a potential runoff.

Rousseff told reporters Lobao had "vehemently" denied the allegations. She asked Brazil's top prosecutor for details of the plea bargain testimony leaked to Veja to see if any government officials are involved so she can take action.

"As president of the nation, I have to act on official information, not on a magazine report," Rousseff said.

According to Veja, the former head of Petrobras' refining and supply unit, Paulo Roberto Costa, told police investigators in a confidential plea deal that he was involved in a vast kickback scheme that provided funds to the government's allies.

Costa was arrested in March in a probe of money-laundering involving Petrobras. Brazilian media dubbed him "the ticking time bomb" because he had threatened to spill the beans and name high-profile politicians benefiting from illegal funds.

Among those he reportedly named were three state governors, six senators and 25 congressmen from three parties in the governing coalition. They included the president of the Senate and the speaker of the lower chamber and the treasurer of Rousseff's leftist Workers' Party.

Petrobras said in a statement it has also asked a federal judge for access to Costa's testimony as part of an internal investigation.

Costa's allegations provided timely campaign ammunition to Rousseff's opponents who have criticized her government for milking Brazil's biggest company for political gain.

The market favorite in the election, Aecio Neves of the Brazilian Social Democratic Party, said the report pointed to the existence of a "criminal organization" inside the oil company.

"These allegations are extremely serious. The president must explain what went on. Her government has moved Petrobras from the financial pages to the crime pages," Neves said at a campaign stop at Marabá in the Amazon region.

Silva, who is campaigning to clean up Brazilian politics and end murky deals between the traditional parties, said Rousseff was politically responsible even if not directly involved. Visiting a daycare center in Sao Paulo, Silva called for a rigorous police investigation "whoever it might hurt."

Yet fallout from the kickback scandal could hurt Silva's own campaign because one of the governors named by Costa as being on the take was Eduardo Campos, the original candidate of her Socialist Party who was killed in a plane crash on Aug. 13.

Silva was thrust into the race by that tragedy and has surged in the opinion polls. Surveys show her running neck-and-neck with Rousseff for the Oct. 5 election but project her defeating the president handily in a runoff three weeks later.

Brazilian financial markets sold off on Monday on anxiety about the impact of the political scandal and uncertainty over the country's political future.

(Editing by Grant McCool)