Ex-president ‘Lula’ dragged into Brazil corruption crisis

The corruption crisis engulfing Brazil’s ruling Workers Party has deepened with the revelation that former president Luiz Inácio “Lula” da Silva is under investigation for influence-peddling.

Federal prosecutors have confirmed they are looking into claims the hugely popular former union leader illegally helped construction conglomerate Odebrecht win overseas contracts with financing from Brazil’s state-run national development bank BNDES.

The new inquiry into Lula comes as dozens of Workers Party politicians and members of its coalition allies are under investigation for looting billions from state-controlled oil giant Petrobras, which last week reported a €15 billion charge due to losses from corruption and mismanagement.

The scandal has already seen former Petrobras executives as well as leading members of Brazil's business community arrested and has provoked calls for the impeachment of Lula's successor, President Dilma Rousseff.

Prosecutors now have 90 days to decide if evidence against Lula calls for a formal investigation into whether he used his influence to get BNDES loans for contracts Odebrecht won in Latin America and Africa after he lobbied local leaders, often after visiting them on corporate jets supplied by Odebrecht.

A statement released by the Lula Institute emphatically denied the accusations which were made in last week's edition of Época news magazine.

Odebrecht, one of the companies named in the Petrobras scandal, also denies any wrongdoing.

Criticism

BNDES president

Luciano Coutinho

also dismissed the investigation saying “the hypothesis [of corruption] is unfounded given the impersonal processes” the bank uses to award financing.

Lula appointed Mr Coutinho in 2007 to run the powerful bank, which is coming under increasing criticism for the opaque methodology it uses to direct billions of euro in cheap financing to favoured Brazilian companies.

The opposition is currently attempting to establish a congressional inquiry into the state bank, which dominates Brazil’s corporate credit market.

Companies that received tens of billions in BNDES loans were among the top contributors to Ms Rousseff’s re-election campaign last year.

The news Lula is under investigation is a new blow to the Workers Party, as he is its only viable candidate to try to succeed Ms Rousseff as president in 2018. He is still held in huge affection by poorer Brazilians for the economic prosperity he brought during his two terms in office.

However, the scandals, which have seen his party’s treasurer arrested, are starting to erode Lula’s popularity. A recent poll showed that he would lose a contest against opposition leader Aécio Neves who narrowly lost to Ms Rousseff in October.

Buying votes

Though never formally charged, Lula has been caught up in several previous corruption scandals. In 2005 his presidency was rocked by revelations that some of his closest party allies were buying votes in congress.

After the conviction of those involved in the so-called mensalão scandal, the scheme's operator, businessman Marcos Valério, told prosecutors he paid a businessman €2 million to prevent him from talking about Lula's knowledge of the circumstances surrounding the death in 2000 of Celso Daniel.

A Workers Party mayor, Mr Daniel was slated to be Lula’s campaign chief for his eventually successful 2002 presidential campaign.

He was kidnapped and murdered in what police said was an ordinary crime. But Mr Daniel’s siblings, also members of the Workers Party, claim their brother was murdered because he had uncovered a corruption scheme that saw municipal contractors pay kickbacks to the party.