Brazilian Prosecutors Take Step Closer to Political Elite

07/28/2015 - 09h17

Luiz Inácio Lula da Silva, Brazil's firebrand former president, told a weekend meeting of trade unionists that the country`s political left was suffering from "persecution".

Unnamed "elitists" were jealous of the achievements of his left-leaning ruling Workers' party (PT) in raising the living standards of the poor, he said.

"What we see on the television looks like the Nazis criminalising the Jewish people," he said.

Mr Lula da Silva was right about one thing - the PT-led ruling coalition is under pressure as never before. But rather than Nazis, the "persecutors" are Brazil`s increasingly proactive and independent federal police, public prosecutors and judges.

Prosecutors broke a tradition of impunity for the powerful in Brazil last week by formally charging the country`s two most important construction bosses for alleged involvement in corruption at state-owned oil company Petrobras.

The move brings an investigation into the scandal one step closer to its ultimate target - politicians in the ruling coalition of Mr Lula da Silva`s chosen successor, President Dilma Rousseff, who allegedly benefited from the scheme.

"We, the public prosecutors and the investigators, have a dream that we share with Brazilian society - that all are treated equally before the law," said prosecutor Deltan Dallagnol, presenting the charges against the construction bosses, Marcelo Odebrecht and his erstwhile rival Otávio Marques de Azevedo.

Both men and their companies, Odebrecht and Andrade Gutierrez, have denied any involvement in corruption as has the PT. But the fact they are being forced to answer the charges at all is a sign of how far Brazil has come in terms of strengthening its institutions, analysts say.

The exposure of the scandal at Petrobras, in which an alleged cartel of construction companies is accused of paying bribes to former employees of the oil company and politicians mostly from the ruling coalition, has brought the important petroleum industry to a halt.

But analysts say it may be a price worth paying if in the long run it helps to clean up the underbelly of politics and business in Latin America`s biggest economy, in which companies are accused of receiving public contracts in exchange for paying political party donations.

"I treat this as the evolution and consolidation of the rule of law in Brazil," said Oscar Vilhena Vieira, director of law at FGV in São Paulo, an academic institution.

He said the Petrobras investigation is partly the product of Brazil`s first successful criminal prosecution of the powerful - the Mensalão, or big monthly stipend.

Under that scandal, former top lieutenants of Mr Lula da Silva were convicted in 2012 by the Supreme Court for using public money to buy the votes of opposition politicians in Congress.

"That was the first phase, it showed the Supreme Court could act," said David Fleischer, political analyst at the University of Brasília.

Ms Rousseff sought to allay public disgust with corruption after the Mensalão by signing a landmark anti-corruption law in 2013.

This law defined new powers for prosecutors, including allowing them to enter into "leniency agreements" in which a suspect agrees to tell all in exchange for a lighter sentence.

The prosecutors in Lava Jato, or car wash, as the Petrobras investigation is known, capitalised on this power and coupled it with "preventive" arrest, the detention without charge of a suspect to stop him or her from tampering with evidence.

The result was a cascade of confessions as prosecutors rounded up first the criminal middlemen involved in the scheme and then the Petrobras executives and other businessmen.

"I don`t consider the Lava Jato 'just another corruption scandal'," said João Augusto de Castro Neves of Eurasia Group. "We see some progress in comparison with the Mensalão - arrests, plea bargains, leniency agreements."

Some worry the case could go too far and paralyse Brazil politically and economically.

The investigators have presented a list of scores of political figures to the Supreme Court for investigation in relation to Petrobras, including Eduardo Cunha, the powerful head of the lower house, and Renan Calheiros, the head of the Senate. Both are from the PT`s main coalition partner, the PMDB.

Mr Cunha responded by announcing this month he was breaking with the government, frightening investors who see his support as necessary if Ms Rousseff is to revive Brazil`s sinking economy.

But analysts say this is a political crisis not an institutional crisis for Brazil. The political system is flexible enough to adapt within the current constitutional framework.

"The institutions are functioning, the lower house and the senate are functioning too, if they need to expel Cunha and Calheiros, they will do it," said Mr Fleischer.

For Brazilians, meanwhile, the message being conveyed by the case is a powerful one.

Images on national television over the weekend showed Mr Odebrecht, Mr Azevedo and other executives being moved to a new prison.

Each Spartan cell contains three concrete beds and there is a communal shower - not the kind of accommodation the country`s most powerful men are accustomed to.

"The central message is that Brazil will not tolerate crime, no matter how powerful the culprits," said Mr Dallagnol, the prosecutor.

Copyright The Financial Times Limited 2015