Brazil ruling party's treasurer charged in Petrobras scandal

BRASILIA/SAO PAULO (Reuters) - Brazilian prosecutors formally charged the treasurer of the ruling Workers’ Party and 26 others with corruption linked to state-run Petrobras (PETR4.SA) on Monday, in the latest blow to President Dilma Rousseff from the widening scandal.

Prosecutors have “ample proof” that Workers’ Party Treasurer Joao Vaccari solicited donations from former Petrobras services chief Renato Duque and executives at engineering firms accused of funnelling money from the oil company, prosecutor Deltan Dallagnol said.

Vaccari was well aware the donations he was seeking comprised funds stemming from bribes, Dallagnol said, adding that much of the evidence was gleaned from plea bargain deals with executives who were indicted and jailed late last year.

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The Workers’ Party says all the donations it received were legal.

Rousseff said the charges against Vaccari showed her government had not interfered with the investigation to get the party off the hook. She has denied knowing about corruption at Petrobras though she was chairwoman of its board from 2003 to 2010 when much of the alleged graft occurred.

“If they want to investigate, they will investigate. Whoever is found responsible will have to pay for what they did,” she told reporters after announcing plans to unveil new measures to fight corruption by the end of the week.

Still, the scandal has heaped political pressure on Rousseff months after she was narrowly re-elected. Outrage among Brazilians helped fuel huge street protests across the country, pressuring her administration and in several cases calling for her impeachment.

Prosecutors also pressed additional charges against 15 executives linked to construction firms OAS [OAS.UL], Mendes Junior (MEND5.SA) and Toyo Setal. Many of the executives had already been indicted in December. An OAS spokeswoman said the firm “vehemently” denies the allegations. Mendes Junior does not comment on ongoing judicial processes, a spokesman said. The other companies did not immediately respond to requests for comment.

‘SCARY’

Duque, who headed the department responsible for the bulk of Petrobras investments from 2003 until 2012, was indicted after federal police arrested him in Rio de Janeiro. He was briefly detained late last year in the early stages of the Petrobras investigation known as Operation Car Wash.

Duque’s arrest warrant was issued after prosecutors discovered transfers of about 20 million euros ($21 million) between accounts he managed in Switzerland and Monaco, along with transfers to U.S. and Hong Kong banks. Prosecutors said the amounts were “not compatible” with his earnings at Petrobras, formally known as Petroleo Brasileiro SA.

Transfers allegedly occurred up until the second half of 2014, after the investigation had started, a revelation the judge overseeing the probe called “scary.”

Duque’s lawyer, Alexandre Lopes, told Reuters his client denied engaging in any crimes at Petrobras. Duque’s arrest was one of six that Brazil’s federal police sought to carry out on Monday.

Vaccari was not among them, a police spokesman said, adding that a warrant has not been issued for his arrest despite the criminal charges he faces. Brazilian law only allows arrests of individuals not convicted of a crime under certain circumstances.

Federal police served a total of 18 search and detention warrants in Rio de Janeiro and Sao Paulo on charges that included bidding fraud.

Duque and Vaccari also face charges of money laundering and forming a cartel. Vaccari’s lawyer said in an e-mailed statement his client never received or solicited any illegal contribution destined for the Workers’ Party.

Another former Petrobras executive, Pedro Barusco, told a congressional hearing last week that the Workers’ Party had received up to $200 million skimmed from Petrobras contracts.

The corruption probe, Brazil’s largest ever, had already led to 40 indictments on racketeering, bribery and money laundering charges.

Prosecutors have asked the Supreme Court to investigate 34 sitting politicians, including the speakers of both houses of Congress, for allegedly receiving bribe money.

(Additional reporting by Silvio Cascione in Brasilia and Roberto Samora and Gustavo Bonato in Sao Paulo; Writing by Caroline Stauffer; Editing by Christian Plumb)

This story has not been edited by Firstpost staff and is generated by auto-feed.