The Noose Is Tightening for Brazil’s Workers Party

    Antonio Palocci arrested by Brazil's Federal Police

    Antonio Palocci arrested by Brazil's Federal Police A medical doctor by training, Antonio Palocci was Brazilian former president Luiz Inácio Lula da Silva’s finance minister and a key player in the 2002 election campaign that put the union and PT (Workers Party) leader in the presidential seat.

    Palocci’s arrest brings the investigation of Brazil’s biggest corruption scandal further into the core leadership of the PT. Last week, police detained Guido Mantega, who succeeded Palocci as Lula’s finance minister and stayed in the post for almost nine years.

    Mantega, who was accused of corruption, was released after a few hours. Palocci was picked up on the same warrant, which could mean his detention will also be brief.

    “This is another nail in the Workers Party coffin,” said Andre Cesar, a political analyst at Brasília-based public policy consultancy Hold Legislative Advisors. “The circle is closing.”

    Antonio Palocci arrested by Brazil's Federal Police

    Lula was indicted last week on corruption charges in a case involving a luxury seaside apartment that prosecutors say was a disguised bribe from a construction company implicated in the Petrobras scheme.

    Still one of Brazil’s most popular politicians, his arrest is unlikely before he goes on trial.

    Palocci helped Lula change his image from a leftist radical into a business friendly and socially progressive leader who finally secured election on his fourth bid.

    As finance minister from 2003 he continued the anti-inflation and pro-market policies of the previous centrist government, helping calm financial markets’ concerns about Lula’s presidency.

    But Palocci was forced to resign in 2006 amid allegations he lied to congress about frequenting a mansion used by lobbyists in the capital Brasília, where political graft was alleged to have been negotiated.

    He joined Rousseff’s administration as chief of staff. However, he stepped down six months later on media reports that his personal wealth jumped by a factor of 20 as a consultant for private companies while also serving in Congress from 2006 to 2010 During 2010, he had been the coordinator of her presidential campaign.

    Assets Blocked

    Palocci was temporarily arrested in São Paulo as part of the 35th phase of the Lava Jato (Car Wash) Operation investigating the Petrobras corruption scandal.

    The newest phase of the operation, codenamed Omertà (Code of Silence), is investigating evidence of a criminal relationship between the former minister and construction company Odebrecht.

    Federal Judge Sergio Moro ordered Palocci’s assets and of others accused of receiving as much as US$ 39.5 million in bribes to be blocked.

    According to the magistrate, this is the amount detailed in a spreadsheet that supposedly records the amounts of bribes transferred to the former minister. The blocking order applies to the bank accounts and investments of those being investigated.

    According to the Federal Police (PF), there is evidence that the former minister acted directly to obtain illicit benefits and funds. Emails that reveal evidence of Palocci’s participation in the crimes under investigation are among the evidence that the taskforce has obtained.

    Prosecutors said at a news conference that Palocci acted as a liaison between the ruling Workers Party, (PT) and Brazil’s largest engineering and construction conglomerate, Odebrecht SA from 2006 to 2013 in a kickback scheme centered on contracts at state-led oil company Petrobras.

    “Evidence has surfaced … that he was responsible for coordinating his political party’s receipt of surreptitious payments from the Odebrecht Group,” read the search and arrest warrant signed by anti-corruption judge Sergio Moro.

    Investigators allege Palocci improperly approved loans from state development bank BNDES to Odebrecht in Africa and for oil platforms. They also allege that he pushed legislation through Congress to help the company win tax advantages.

    Prosecutors said they had found evidence that Odebrecht paid US$ 39.5 million to the Workers Party and its representatives between 2008 and 2013, including Palocci.

    Construction magnate Marcelo Odebrecht, whose family owns the namesake company, received a 19-year sentence in March for bribery, money laundering and organized crime in relation to the scandal at Petrobras.

    Odebrecht papers referred to Palocci as the “Italian” and this nickname shows up in payment spreadsheets that had been seized by the PF in previous chapters of the investigation.

    Branislav Kontic, a former aide to Palocci when he was Presidential Chief of Staff, and Juscelino Dourado, his Chief of Staff when he was Finance Minister, also had warrants issued for their arrests. Kontic, also known as “Brani” continued working with the PT leader even after he had left his formal position.

    Under the scope of the plea-bargain deal that the firm is negotiating with Federal Prosecutors and Police, executives from the company are providing detailed information regarding the relationship between Palocci and the group.



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