Brazil president's lawyers demand removal of top prosecutor

Lawyers defending Brazilian President Michel Temer against corruption allegations asked the Supreme Court on Tuesday to remove the prosecutor general from the investigation, arguing he is no longer fit to lead it.

In a filing to the top court, Temer's lawyers said Brazil's top federal prosecutor Rodrigo Janot, who has charged the president with taking bribes and has said more charges are imminent, was acting "beyond his constitutional limits."

"We are not, it has become clear, confronting mere institutional action," Temer's lawyers wrote in the document seen by Reuters. "Everything indicates that the motivation is personal."

Janot's office did not immediately respond to a request for comment.

The request will be decided by Supreme Court Justice Luiz Edson Fachin, the judge in charge of a massive investigation into political kickbacks. Legal experts said it was unlikely he would agree to remove Janot in the middle of the biggest corruption investigation in Brazilian history.

Temer, the first sitting Brazilian president to face formal corruption charges, got some relief last week when the lower house of Congress voted to block a bribery charge filed by Janot.

But Temer's opponents hope a second or even third charge from Janot could be based on more solid evidence of Temer's links to political bribes. That could push lawmakers to vote against protecting Temer from a trial as they worry about voters turning on them in next year's elections.

Under Brazil's constitution, any criminal charges leveled against a president must be approved by two-thirds of the lower house, and only then can the Supreme Court decide whether to put a leader on trial.

Temer was charged in June in connection with a graft scheme involving the world's largest meatpacker, JBS SA. Executives said in plea-bargain testimony the president took bribes for resolving tax disputes, freeing up loans from state-run banks and other matters.

Janot alleged that Temer arranged to eventually receive a total of 38 million reais ($12.14 million) from JBS in the coming nine months.

The prosecutor has said on several occasions that he is likely to soon file obstruction of justice and racketeering charges against Temer.

The case against the president is part of an unprecedented anti-corruption push that Brazil's federal police, prosecutors and some judges have pursuing for over three years.

Investigators have uncovered stunning levels of graft engulfing Brazil's political and business elites. Much of it centers on companies paying billions of dollars in bribes to politicians and executives at state-run enterprises in return for lucrative contracts.

Temer and one-third of his cabinet, as well as four former presidents and dozens of lawmakers, are under investigation or already charged. More than 100 people have been convicted, including former President Luiz Inacio Lula da Silva, who is free pending appeal.

Source: Reuters

South Korea prosecution seeks 12 years in jail for Samsung scion

The South Korean Prosecution Monday sought a 12-year prison sentence for Samsung Group heir, Lee Jae-yong, over charges of bribery, embezzlement and concealment of foreign assets as part of the massive Rasputin scandal.

The prosecution's petition was filed during the last session of Lee's trial that began early March in Seoul's Central District Court.

Source: EFE

Brazil, Argentina prosecutors say governments interfering in Odebrecht probe

The top prosecutors of Brazil and Argentina are accusing their governments of interfering in the creation of a joint anti-corruption task force to investigate bribes by the Odebrecht engineering group so that politicians, many of whom are under investigation, can themselves control the exchange of evidence.

Brazil's Prosecutor General Rodrigo Janot said on Tuesday the two countries had agreed in June to set up a task force to allow the rapid and simultaneous investigation of bribes paid by Odebrecht, but the joint effort has not taken off.

"The task force is an essential tool without which we cannot join forces regionally to fight corruption," he told reporters.

A statement issued late on Monday by Janot and his Argentine counterpart, Alejandra Gils Carbo, accused the governments of their countries of interfering in the effort to jointly investigate the Odebrecht bribe network.

"The main authorities for international legal cooperation -- Brazil's Justice Ministry and Argentina's Foreign Ministry -- have placed obstacles and made requisitions that are an undue interference in carrying out agreements signed by prosecutors of the two countries in the Odebrecht investigation," the statement said.

"We hope the central governments support our efforts and urgently remove the obstacles that have been imposed," it said.

They said Brazil's Justice Ministry has sought to establish the rules of the joint force so evidence was shared through government channels and not directly between the prosecutors.

In Argentina, they said, the Foreign Ministry wanted to turn the task force into a treaty signed by the government, undermining cooperation between the actual investigators.

Odebrecht, Latin America's largest construction firm, is at the center of a global graft scandal. As part of a $3.5 billion settlement with Brazilian, U.S. and Swiss authorities in December, the company admitted to paying bribes in 12 mostly Latin American countries, including $35 million in Argentina, to secure lucrative contracts. Prosecutors in Argentina are also investigating four projects involving Odebrecht, the largest construction firm in Latin America, for corruption.

U.S. prosecutors said Odebrecht paid approximately $788 million in bribes in association with 100 projects in 12 countries between 2001 to 2016, through carefully disguised payments routed through a network of shell companies.

Janot said it was not the first time prosecutors have run into hurdles in setting up binational task forces to investigate international connections of Brazil's massive graft scandal first centered on contracts at state-run oil company Petrobras.

A task force proposed by Swiss prosecutors a year ago and another sought six months ago by Spanish prosecutors never got off the ground. "And now this one with Argentina," Janot said.

Source: Reuters

For Brazil judge Moro, politicians not yet keen to fight corruption

Brazilian federal judge Sergio Moro, the man behind Brazil's largest ever corruption investigation, said there is still lack of interest from the country's political establishment to fight corruption, despite the political and economic crisis the practice sent the country into.

In one of his rare interviews and the first since the conviction of former president Luiz Inacio Lula da Silva, Moro told Latin American news outlets who comprise the "Investigate Car Wash" cooperative journalism group, that politicians think this is not a task they should consider as their duty.

"Unfortunately, I see the lack of a more vigorous attitude from Brazilian authorities regarding the problem of corruption," said Moro in the interview, which was partially published on Sunday by Brazilian newspaper Folha de S.Paulo.

"There is the impression that fighting corruption is only a task for policeman, prosecutors and judges," said Moro, the judge overseeing the so-called Car Wash investigation that has sent dozens of politicians and businessmen from Brazil's elite to jail.

Earlier this month, Moro sentenced Lula to nearly 10 years in jail after finding him guilty of accepting 3.7 million reais ($1.2 million) worth of bribes from engineering firm OAS SA, money prosecutors said the company spent refurbishing a beach apartment for Lula in return for his help winning contracts with state oil company Petroleo Brasileiro SA (PETR4.SA).

The ruling marked a stunning fall for one of the country's most popular politicians, and a serious blow to Lula's chances of a political comeback. The former president faces four more corruption trials and will remain free on appeal.

Current president Michel Temer also faces accusations of having taking bribes from meatpacker JBS (JBSS3.SA) to facilitate the firm's businesses in the country. Brazilian Congress will vote during the week if it allows or not the corruption charge to be sent to the Supreme Court for the leader to be put on trial.

In the interview, Moro hit back at criticism from Supreme Court judge Gilmar Mendes regarding some of the methods used by him during the Car Wash investigation, such as prison orders issued even before the trials.

"Judges have different understandings. There are no extraordinary law in the cases judged here. But in the Car Wash, to interrupt the cycle of crime, some drastic measures were needed," said Moro.

Source: Reuters

Brazil congressional panel votes against putting Temer on trial

Brazilian congressional committee on Thursday voted against sending a corruption charge against President Michel Temer to the Supreme Court for the leader to be put on trial.

The vote is non-binding and the full house must still vote on the charge, which would only be approved if two-thirds of legislators vote for it.

Temer was charged last month in connection with a graft scheme involving the world's largest meatpacker, JBS SA. General Prosecutor Rodrigo Janot accused Temer of arranging to receive a total of 38 million reais ($11.85 million) in bribes from JBS in the next nine months.

The full house will vote on August 2, after a two-week recess. Though Temer's support has waned, he is widely expected to survive the full house vote.

Janot has said he expects to level at least two new graft charges against Temer in the coming weeks, however.

Several lawmakers have told Reuters in recent weeks that if they were forced into multiple votes to protect the deeply unpopular president from a trial, the chances of one of the charges being accepted by the lower house would greatly increase.

Temer, who replaced impeached President Dilma Rousseff last year, would be removed from office for at least 180 days if he were forced to stand trial in the Supreme Court.

Source: Reuters

Lawyer for Brazil's Temer derides corruption case as 'fiction'

REUTERS/Ueslei Marcelino

Brazilian President Michel Temer's legal team said on Wednesday that a corruption charge against him was based entirely on an illegally taped recording and plea-bargain testimony from confessed criminals.

Temer's lawyer Antonio Mariz de Oliveira made the arguments in the written defense he delivered to a congressional committee looking into a charge the conservative leader took bribes.

"The defense believes that the charge is not based on facts; that it's a piece of fiction based on hypothesis and assumptions," Mariz told reporters after delivering the written defense to congress.

Temer has repeatedly denied any wrongdoing. He refuses to resign despite opposition calls to do so and polls showing his government's approval rating is in the single digits.

In the defense, Temer's legal team said a March audio recording, which prosecutors said captured the president condoning payment of hush money to a potential witness, was illegal because it was secretly recorded.

Temer also argued the recording was altered and that the man who made it - billionaire Joesley Batista, whose family controls meatpacking giant JBS SA - was a criminal who had admitted to bribing hundreds of politicians in plea bargain testimony to avoid jail time.

The defense said Temer's remarks in the audio were too vague to support the charge against him.

Temer was charged last week in connection with a graft scheme involving JBS. Executives said the president took bribes for resolving tax matters and facilitating loans from state-run banks.

Prosecutor General Rodrigo Janot alleged in the charge that Temer made deals under which JBS would have paid him 38 million reais ($11.54 million) over the next nine months.

Janot's office declined to comment on Temer's written defense or comments from his attorney including the contention that the recording and plea-bargain testimony are the entirety of the case. However, the prosecution has said it has more proof it will reveal.

Janot has said he expects to also charge Temer with racketeering and money laundering in the coming weeks.

Under Brazilian law, two-thirds of the lower house of congress must vote to allow a criminal charge against a sitting president to move to the Supreme Court. The full house is expected to vote by mid-July, although it is possible that could be delayed to early August after a congressional recess.

If the top court accepts a charge and puts the president on trial, he would be suspended for 180 days and replaced by the house speaker, Rodrigo Maia.

Investigators have uncovered corruption in the last three years that has engulfed Brazil's political class and business elites. Much of it centers on companies paying billions of dollars in bribes to politicians and executives at state-run enterprises in return for contracts.

Temer and nine ministers as well as four former presidents and dozens of lawmakers are under investigation or already charged in the schemes.

Nearly 100 people have been convicted on corruption charges in just over three years.

Source: Reuters

Brazil authorities seek arrest of 95 Rio de Janeiro police officers

Brazilian authorities issued arrest warrants on Thursday for 95 police officers in Rio de Janeiro state who they say have sold arms and tipped off drug gangs to future operations, in the largest such effort yet to root out corrupt officers.

Another 90 arrest warrants were issued for suspected drug traffickers, police and state prosecutors said in an emailed statement.

By midday, about 50 people had been arrested, roughly half of them police, authorities said.

Investigators said they were targeting police who maintain ties to the powerful drug gangs that control vast swaths of metropolitan Rio de Janeiro.

Police were accused of selling powerful rifles to gang leaders and tipping them off to police actions that would be carried out in the slums the gangs control in return for bribes.

Source: Reuters

Corruption charges against Brazil's Temer expected to come in waves: source

Brazil's top federal prosecutor will level corruption charges against President Michel Temer one at a time instead of making all the accusations at once, a strategy aimed at weakening his defense, a source with direct knowledge of the process told Reuters on Friday.

Under Brazilian law, any criminal charges against a sitting president must be approved by two-thirds of the lower house of Congress in order for the Supreme Court to put a leader on trial.

Top prosecutor Rodrigo Janot is expected to charge Temer with receiving bribes early next week. The president is also facing accusations of racketeering and obstruction of justice.

Temer's office and his attorney, Antonio Mariz, did not immediately respond to requests for comment. Temer has repeatedly said he is innocent of all accusations.

The investigation is hampering the president's ability to push his economic reforms through Congress.

Key lawmakers in Temer's alliance told Reuters this week, on condition of anonymity so they could speak freely, that they will set aside work on those proposed labor law reforms if forced to vote on criminal charges against Temer.

They also said they will not even consider advancing work on pension reforms until changes to the labor law are passed.

Temer is being investigated in connection with a political graft scheme involving JBS SA, the world's largest meatpacker. Company executives said in plea-bargain testimony that the president took nearly $5 million in bribes in return for help resolving tax matters, for freeing up loans from state-run banks and other matters.

Joesley Batista, one of the brothers who control JBS, also made a recording of a conversation he had with Temer earlier this year. In it the president appears to condone paying off a potential witness. Batista also accused Temer and aides of negotiating millions of dollars in illegal campaign donations for his Brazilian Social Democracy Party.

Lawyers defending Temer were trying to dismiss the use of the recording in the investigation, saying it was manipulated. But police said on Friday after finishing an analysis of the audio files and the equipment used by Joesley Batista to record the president that they were valid.

Lawmakers in Temer's alliance say they have the one-third of lower-house votes required to block any charges against Temer. Out of 513 deputies, leaders in the alliance said this week they have between 250 and 300 votes.

But they also told Reuters they widely expected Janot to use the strategy of dragging out the charges against Temer in an effort to wear down lawmakers with multiple votes.

Those ballots will be deeply unpopular with Brazilian voters who overwhelmingly believe Temer is corrupt, according to opinion polls.

It also gives more time for possible new corruption revelations to surface against Temer, said another key lawmaker speaking on condition of anonymity, potentially eroding his support in the house.

Source: Reuters

Close aide to Brazil's leader Temer arrested in corruption inquiry

Former Brazilian lawmaker Rodrigo Rocha Loures, a close aide and friend of President Michel Temer, was arrested at his home on Saturday in a corruption investigation that also targets the president, a federal police spokesman said.

In a police video released in May, Loures was seen running out of a Sao Paulo restaurant carrying a bag with 500,000 reais ($154,000) in cash that prosecutors say was a bribe from the owners of the world's largest meatpacker JBS SA.

Plea bargain testimony by two executives of JBS's holding company J&F Investimentos SA implicated Temer and other politicians in graft and led prosecutors to accuse Rocha Loures of being a middleman for Temer, which the president has denied.

The Supreme Court authorized the investigation of Temer and Rocha Loures for corruption, criminal organization and obstruction of justice, triggering the worst political crisis since Temer took over from impeached leftist Dilma Rousseff last year.

Since the leaking of a recording of a late-night conversation with a JBS executive in which he appeared to condone corrupt practices, Temer has faced calls for his resignation or impeachment.

An electoral court investigation of his 2014 election for illegal campaign funding could also oust him from office.

Loures, a businessman turned politician, is expected to seek a plea bargain with prosecutors that could damage the president's case that he did nothing illegal.

Loures has hired a lawyer to prepare a plea bargain, a source with knowledge of the matter told Reuters.

Last week, he turned over a bag full of cash to police, apparently as a step to reaching agreement with prosecutors, who are investigating him for negotiating 15 million reais in bribes from JBS.

It was not immediately possible to reach the lawyer of Loures. Temer's office had no immediate comment on the arrest of his former aide.

Temer has said his relationship with Loures was purely "institutional" yet Loures had an office in the presidential palace close to Temer when he was Rousseff's vice president.

Source: Reuters

Scandal-hit Brazilian leader Temer picks new justice minister

Scandal-plagued Brazilian President Michel Temer on Sunday named a new justice minister, placing a respected legal figure in the position as the leader defends himself against corruption allegations.

The presidential palace gave no reason for naming Torquato Jardim as his new justice minister in a short written statement.

Since March, Jardim was the nation's transparency minister. Before that, he had served as a justice on Brazil's top electoral court.

Jardim replaced Osmar Serraglio, a lawmaker from Temer's own party, who had been in that post for just three months. A source close to Temer told Reuters that Serraglio will soon be announced as the new transparency minister.

Source: Reuters

Brazil markets plunge as Temer scandal threatens reforms

Brazilian markets plummeted on Thursday as allegations that President Michel Temer condoned bribes to silence a key witness deflated investor optimism about the prospects for his ambitious pension and labor reform agenda.

Brazil's benchmark Bovespa stock index .BVSP closed 8.8 percent lower, its biggest daily decline since the 2008 financial crisis. Trading had been halted for an hour after a 10 percent drop triggered a circuit-breaker mechanism.

Blue-chip stocks such as lender Itaú Unibanco Holding SA (ITUB4.SA) and state-controlled oil company Petróleo Brasileiro SA (PETR4.SA) dragged the index lower.

The declines slashed 26 billion reais ($7.7 billion) off the market values of Itaú and Petrobras.

The Sao Paulo stock exchange saw 3.1 million transactions, breaking a previous record set in October 2014, the day former President Dilma Rousseff won a narrow runoff election, according to exchange operator B3 Bolsa Balcão Brasil SA (BVMF3.SA).

Temer was caught on tape encouraging a prominent executive to pay a monthly fee to keep jailed former House Speaker Eduardo Cunha silent in the country's biggest-ever graft probe, sources said on Wednesday, confirming a report in newspaper O Globo.

"Brazilian stocks and assets and their currency have rallied very strongly up until really today. It's a big pullback and ... it at least brings the risk up to the surface again," Alliance Bernstein Managing Director of Equity Product Management Eric Sprow said.

The report threatened to torpedo a two-year rally in Brazilian assets as traders quickly reassessed the chances of success for efforts to streamline the country's social security system and reform labor regulations. As a result, policymakers' attempts to curtail the growth of public debt and foster economic growth may also be in doubt.

Strategists at JPMorgan Securities and UBS Securities downgraded their recommendations on Brazilian equities to "neutral," citing increased risks to the implementation of structural reforms.

Trader Thiago Castellan at São Paulo-based Renascença brokerage said: "For the market, it's not a question of whether Temer will be ousted or not. The question is whether it will be quick and for how long reforms will be delayed."

Temer denied the allegations on Thursday, saying he will not resign. His remarks disappointed traders who had hoped for a swift resolution to the political crisis, putting renewed pressure on Brazilian stocks and currencies going into the close.

POLICYMAKERS SPRING TO ACTION

The Brazilian real BRBY slumped 8 percent to 3.38 reais per U.S. dollar, the biggest percentage drop since the currency was devalued in 1999, wiping out its gains in 2017, while bond prices tumbled.

Strategists at Credit Suisse Securities revised forecasts for the Brazilian real, saying the reform agenda was likely to be put on hold. They expect the currency to weaken to 3.50 in three months and 3.70 in 12 months, compared to 3.20 and 3.50 previously.

The sharp moves drove the market operator B3 to widen the limits on trading of several derivatives and put policymakers on alert.

The central bank sold $4 billion worth of new traditional currency swaps, increasing the stock of outstanding swaps by nearly a fourth from the current $17.7 billion.

Over the last two years, the bank has acted to reduce the amount of swaps, which function like future dollar sales to investors, from more than $100 billion by late 2015, to cut taxpayers' exposure to currency moves and limit market imbalances.

The National Treasury also swept to action, calling off an auction of fixed-rate and floating-rate bonds scheduled for Thursday and offering to buy or sell local notes in three extraordinary auctions in coming days.

Yields paid on Brazilian interest rate futures <0#2DIJ:> spiked as traders bet the central bank would be forced to cut rates at a slower pace as the reforms outlook dimmed.

Rate futures prices indicated traders saw a 79 percent chance that the central bank would cut the benchmark Selic rate by 50 basis points this month and a 21 percent chance of a 75 basis-point reduction. On Wednesday, most bets pointed to a cut of 125 basis points.

Source: Reuters

Brazilian banks turn up heat on scandal-hit Odebrecht

Banks are raising the heat on Brazilian conglomerate Odebrecht SA to put its house in order after months of treating the scandal-hit company with kid gloves because of fears its collapse could hurt their balance sheets, sources said.

Odebrecht has agreed to accelerate asset sales as part of a deal with creditor banks to let the heavily indebted company keep $800 million from the divestiture of its water and waste unit announced last month, enough to fund its cash needs for two years, according to several executives, bankers and lawyers involved in the talks.

The conglomerate also agreed to surrender to creditors all dividends from its crown jewel, petrochemicals unit Braskem SA (BRKM5.SA), and to place more assets as collateral for loans under renegotiation, said the people, who asked not to be named because the terms of the agreement with creditors were not made public.

"All the parties agreed that steps to resolve this drama once and for all must be taken carefully but quickly," said one of the people involved.

The agreement shows how creditor banks holding a big chunk of Odebrecht's 76 billion reais ($24.34 billion) in outstanding debt are growing increasingly assertive.

In part, banks' new-found confidence stems from a plea deal struck by Odebrecht in December with U.S., Brazilian and Swiss prosecutors, which drew a line under the main legal risks to the group.

Odebrecht and Braskem admitted to bribing officials in 12 countries, mostly Latin America, and agreed to pay $3.5 billion in fines in return for freedom from prosecution.

Lenders also feel they have given Odebrecht enough time and have dealt with other headaches in their credit portfolio over the last year, giving them more room to maneuver.

"Now the leniency deal is a reality, we believe that Odebrecht can downsize assets and liabilities at a faster pace," one senior banker said.

The tougher stance is evident from how banks are dealing with Odebrecht's 38 percent stake in Braskem, Latin America's No. 1 petrochemical firm.

While Chairman Emilio Odebrecht wants Braskem to lead the group's recovery, bankers believe they have the right to decide the fate of the stake - pledged as collateral for a debt restructuring of agribusiness unit Odebrecht Agroindustrial SA.

"It should be up to us, not Odebrecht, to decide what to do with Braskem," said the chief executive officer of a large Brazilian lender.

HIT BY SCANDAL, RECESSION

Once the nation's biggest employer, Odebrecht has been floored by Brazil's "Operation Car Wash" investigation into political kickbacks on state infrastructure contracts. Brazil's harshest recession on record has compounded problems for the family-owned group.

Restricted access to capital and a tarnished reputation led Odebrecht to miss a 12 billion-real asset sale goal for mid-2017.

The target has been extended until next year under the accord governing April's sale of Odebrecht Ambiental SA.

However, Brazil's government has joined creditors in pushing for the bulk of the target to be completed this year, officials, bankers and lawyers familiar with the restructuring told Reuters.

Some banks have balked at how slowly the Odebrecht family, which retains control over the company it founded in 1944, is selling shipbuilding, biofuels and oil drilling assets. Others question whether the family should retain command after its role in the corruption scandal.

In a statement to Reuters, Odebrecht said it is pursuing the downsizing, noting that gross revenue fell to around 90 billion reais ($29 billion) last year. The group declared gross revenues of 132.5 billion reais in 2015.

"After reaching agreements with judicial authorities in Brazil, U.S., Switzerland and Dominican Republic, the group is working to sign similar deals with other countries to take the group to a new standard of ethics, governance and transparency."

On Friday, Odebrecht named Luciano Guidolin, who played a key role in negotiating the plea deals, as its new chief executive officer.

Yet revelations that Odebrecht bribed politicians across Latin America have complicated efforts to win new contracts.

The backlog for civil construction unit Odebrecht Engenharia & Construção SA shrank 50 percent over two years to December 2016 to $17 billion, the lowest since 2008, according to preliminary financial data seen by Reuters.

Emilio Odebrecht has created stricter compliance structures and vowed to keep family members out of the group's boardrooms.

A person familiar with Odebrecht SA's finances said management agreed to book all of December's fine in last year's income statement, alongside heavy asset writedowns and charges related to the bribery scheme.

That would lead to the group posting a record loss, to be announced in the coming weeks, the person said.

The question is whether the company can rebuild its order book after it was banned from bidding on Brazilian public works contracts and shown the exit from at least four other Latin American countries.

Several top Brazilian officials are lobbying antitrust and auditing agencies to avoid additional penalties.

"I've seen many people spreading the word that Odebrecht will not survive, but that goes against this whole idea of designing leniency deals," said Carlos Lima, a prosecutor in the Car Wash taskforce. "We want the company working and we want it clean."

Source: Reuters

Brazil politicians hit by corruption scandal unlikely to return, former president says

Politicians caught up in a sweeping three-year graft investigation are unlikely to return to their positions of power, former President Fernando Henrique Cardoso said in an interview.

Cardoso included Brazil's former President Luiz Inacio Lula da Silva, the front-runner in early polls for next year's presidential elections despite facing five corruption trials, as among those whose political careers have likely been destroyed by the kickbacks probe.

"It is unlikely that the people touched by the corruption scandal will return to the leadership they once had," said Cardoso, a founder of the Brazilian Social Democratic Party (PSDB), which backs the current center-right government.

Cardoso, himself facing accusations in the investigation, also said the profound cultural and constitutional changes now needed to truly clean up Brazil's system will take time.

Brazil's biggest graft investigation, known as "Operation Car Wash," has turned up evidence of corrupt practices as recently as June, suggesting political kickbacks at state companies carried on despite the detention of scores of powerful businessmen and politicians.

"Car Wash has played a very important role in Brazil because it lifted the lid, which was necessary. But that will not resolve things immediately. It is a process," he said late on Thursday in his office in downtown São Paulo.

Cardoso presided over Latin America's largest nation between 1995 and 2003 after swiftly tackling persistent hyperinflation as finance minister with the Real Plan. He said it would take time to curb "the permissiveness of Brazilian culture."

"How do you change a culture? With time and by setting a good example - there is no other way," said Cardoso.

A noted sociologist, the former president has been cited in a blockbuster plea bargain by former executives of engineering company Odebrecht who say they gave Cardoso illegal campaign donations for his presidential runs.

The Odebrecht testimony prompted the Supreme Court to open investigations against dozens more sitting politicians last month, including nearly a third of President Michel Temer's cabinet. A lower-level judge will eventually decide if Cardoso himself should be investigated. He denies any wrongdoing.

UNCERTAIN ELECTIONS

The Supreme Court, the only court authorized to try sitting politicians in Brasilia, is struggling to cope with the deluge of cases. Cardoso, an influential voice in the PSDB, said the scandal made it impossible to say whose reputation would survive intact until the October 2018 presidential election.

Lula, Brazil's first working-class president who held the office between 2003 and 2011, faces five court cases related to Operation Car Wash that could bar him from running - something his supporters have branded a witch hunt.

Cardoso said the only nationally recognized newcomer untainted by the corruption scandal is São Paulo Mayor Joao Doria, a businessman affiliated with the PSDB. A party structure is key to campaigning in a country as vast as Brazil, he said, making it unlikely a total political outsider could win the presidency.

The PSDB also has seasoned presidential contenders such as São Paulo Governor Geraldo Alckmin and Senator Aecio Neves, both also facing corruption investigations, but it is leftist Lula who leads polls, buoyed by opposition to an unpopular pension reform and easing of labor regulations.

Temer's ambitious reform agenda, which would raise the average retirement age and cut automatic funding for unions, last week triggered Brazil's first general strike since 1996, when Cardoso's privatizations and labor reforms led to a mass stoppage.

Cardoso praised the new reforms, but said the Temer government's main failure was not explaining them to the public.

Resistance to reforms has also been hardened by complaints about the legitimacy of the impeachment last year of Lula's political heir, leftist President Dilma Rousseff. Her removal brought then-vice president Temer to power. [nL1N1BC0E8]

"The government's problem is that it arrived by Constitutional imposition not a direct vote," Cardoso said. "Obviously a government that has that origin does not have the force to do everything needed. We need an election."

Source: Reuters

Brazil's Temer calls $40 million Odebrecht bribe accusation 'a lie'

Brazil's President Michel Temer denied on Thursday that he hosted a meeting in 2010 where an executive of engineering firm Odebrecht SA [ODBES.UL] was asked to arrange an illegal payment of $40 million to his political party.

The graft accusation, which Temer dismissed as "a lie," was made in plea bargain testimony by Marcio Faria da Silva, a former vice president of the industrial arm of scandal-plagued Odebrecht.

Though potentially damaging to his credibility, and efforts to shore up Latin America's biggest economy, Faria's allegation does not threaten Temer's hold on power. As president, he has temporary immunity for anything that occurred before he took office last year.

The accusation was made public on Wednesday as part of a rash of plea bargain deals by 77 Odebrecht executives caught up in a massive corruption scheme.

Faria said he met with Temer in 2010 in his Sao Paulo legal office, together with former lower house speaker Eduardo Cunha and Congressman Henrique Eduardo Alves, all members of the Brazilian Democratic Movement Party (PMDB).

At the meeting, the payment was requested as a 5 percent levy on a contract Odebrecht was seeking from state oil company Petroleo Brasileiro SA's for the maintenance of assets in nine countries, Faria said.

Temer confirmed in a video statement posted on social media that he took part in a meeting with a company executive in 2010 but there was no talk of an illegal donation.

"It is a lie that in that meeting I heard any reference to money or any shady dealings between the company and politicians," the president said.

Earlier on Thursday, Temer's office confirmed in a separate statement he met with Faria in 2010 in the presence of Cunha for a "quick and superficial" meeting, but denied that Alves participated.

Representatives for Alves and Cunha, who is in prison pending trial on other charges, could not be reached for comment.

The testimony by Faria was among dozens of plea bargain testimonies released by Supreme Court Justice Luiz Edson Fachin.

Based on the testimony, Fachin ordered investigations into nearly 100 politicians as part of the Operation Car War probe into billions of dollars in bribes and illegal kickbacks on contracts with state companies, particularly Petrobras.

The allegations come as Temer is trying to push an overhaul of Brazil's pension system through Congress, part of a business-friendly agenda that has sparked a rise in Brazil's stockmarket and currency. Congress is due to start discussions of the reform next week.

Some lawmakers on Thursday said the government would look to speed up the passing of reforms now that so many politicians were under investigation, but admitted that such a move might prove difficult.

In his testimony, Faria alleged that, while Temer did not speak about any figures, Cunha made it clear that a payment was expected.

"He explained that we were seeking a contract with Petrobras. A commitment that it would be signed would require a very important contribution to the party," Faria said, adding it was clear that a bribe was being sought.

Once the contract was won, the payment was made in cash in Brazil and to foreign bank accounts, Faria said. He said the PMDB took 4 percent of the value of the contract, leaving 1 percent for the left-leaning Workers Party of then-President Luiz Inacio Lula da Silva.

Odebrecht's former Chief Executive Marcelo Odebrecht, currently jailed for his part in the Car Wash scheme, said in a separate plea bargain deal that he had made available $40 million to Lula. He said the payment was negotiated via a minister, not with Lula himself.

Lula also denied any wrongdoing on Thursday while hinting that he was gearing up for presidential elections next year, despite five court cases pending against him related to Operation Car Wash.

Elected as Brazil's first working class president in 2002 and returned to office four years later, Lula is ahead in opinion polls for the 2018 vote.

"I will fight if they let me fight and I will prove that this country can be happy again," Lula said, adding that "plea bargains have to be proved."

Source: Reuters

Brazil's Temer says government offered 'all it could' on pension reform

Brazilian President Michel Temer said his government has offered "all it could" to ease lawmakers' resistance to a landmark pension reform bill, key to rebalance the government's strained finances, according to an interview published on Saturday.

Temer's center-right government, which took office last year pledging to tackle Brazil's massive government deficit, proposed five concessions to wavering congressmen on Friday, amid signs of resistance among legislators to the unpopular reform.

These included easing the rules on the transition to the new system and on rural workers, pensions for police and teachers, as well as benefits for the elderly and disabled.

Temer told the Folha de S. Paulo newspaper that he would not compromise on the central tenet of the legislation, which is introducing a minimum retirement age. While the government wants a minimum age of 65 for men, it could discuss reducing that for women, if necessary, Temer said.

"If we set the minimum age for men at 65, and 64 or 63 for women, it would not mean a big change," Temer said, adding that a different age for women is still not under discussion.

The pension plan, submitted last year to Congress, is aimed at curbing a growing deficit in Brazil's generous pension system, meant to provide rights guaranteed in the country's 1988 Constitution. It would require more years on the job for workers to gain full pension benefits.

The government said on Friday it faces a deficit in the pension system of 202 billion reais ($64.21 billion) next year.

Temer also said he does not intend to issue any decree exempting workers from the outsourcing law he sanctioned last month, adding he does not see the law harming workers´ rights.

Press representatives at the presidential palace confirmed to Reuters the content of the interview to Folha de S. Paulo.

Source: Reuters

Former Brazil house speaker Cunha sentenced to 15 years for graft

A federal court sentenced Brazil's former speaker of the lower house, Eduardo Cunha, to more than 15 years in prison on Thursday for corruption, making him the highest-profile political conviction yet in the "Operation Car Wash" scandal.

The former politician's defense team said they would appeal the decision. Cunha will remain imprisoned pending appeal.

Cunha, who drove the successful impeachment of former President Dilma Rousseff, was forced from his position as speaker in July and arrested in October on accusations he received millions in bribes from the purchase of an oil field in Benin by state-controlled oil company Petróleo Brasileiro SA.

Over 200 people have been charged in the "Operation Car Wash" probe, a far-reaching investigation that centers on bribes and political kickbacks from contracts at Petrobras and other state firms. The Supreme Court is likely to approve soon the investigation of dozens of sitting politicians.

In February 2015, Cunha, a member of President Michel Temer's Brazilian Democratic Movement Party (PMDB) that for a decade was the main member of left-leaning Workers Party (PT) governments, defied the wishes of his own coalition to run for and win the speakership of the lower house of Congress.

Just six months later, he officially broke with the Rousseff administration, saying that she was using the Petrobras investigation as a tool of "political persecution" against him.

As speaker, only Cunha could allow impeachment proceedings to begin against Rousseff, whom critics accused of breaking budgetary laws.

He did just that in December 2015, just hours after PT deputies cast deciding votes for him to face an investigation by the House's ethics committee for lying about bank accounts he and his wife held in Switzerland.

By May, Rousseff was impeached and Temer installed as successor. But Cunha could not shake free of corruption allegations that eventually led to his downfall.

Once he was kicked out of congress, Cunha lost the privilege given to sitting politicians that only the badly overburdened Supreme Court can try them.

His case was instead sent to crusading anti-corruption judge Sergio Moro, who has been the driving force behind Brazil's fight against graft. Moro has a reputation for plowing through cases efficiently, with over 98 percent of his convictions in Car Wash cases being upheld by higher courts.

Cunha faces another trial for allegedly receiving $5 million skimmed from Petrobras contracts for two drillships in 2006 and 2007.

Separately on Thursday, federal prosecutors leading the Car Wash probe for the first time accused a party of the civil crime of "misconduct in political office" for taking part in the Petrobas scheme.

The authorities said they are seeking 2.3 billion reais ($731 million) from the Progressive Party (PP) for bribes its members received and for fines. Prosecutors are also demanding six sitting PP congressmen and four former deputies lose their offices and rights to run for office in the future.

Source: Reuters

FIFA completes internal investigation into alleged corruption

FIFA said on Friday that it had completed an investigation it opened in June 2015 after the office of the Attorney General of Switzerland (OAG) and the United States Department of Justice (DOJ) announced investigations into allegations of criminal misconduct, bribery and corruption in world football.

In a statement, FIFA said that more than 2.5 million documents have been analyzed and a large number of key witnesses interviewed since the opening of the investigation.

Source: EFE

Carnival party over, Brazil returns to reality of political crisis

Carnival revelers were still dancing in the streets of Brazilian cities on Wednesday but for President Michel Temer's government it was back to the reality of mounting corruption allegations that threaten its survival.

"Out with Temer" was a frequent chant against the unpopular president during the annual celebrations across a country hit by record unemployment and fed up with its political leaders.

On Wednesday afternoon the jailed former CEO of Brazil's biggest engineering group, Marcelo Odebrecht, was questioned by a judge investigating donations made to Temer's 2014 campaign, when he was the running mate for leftist leader Dilma Rousseff, who was impeached last year.

A source with access to Odebrecht's deposition said he confirmed an illegal payment to Rousseff's campaign manager Joao Santana, but added that he could not say if the then-president or her running mate knew about it.

Odebrecht said former finance minister Guido Mantega negotiated under-the-table donations for the 2014 campaign that totaled 300 million reais, but he denied they were bribes to obtain government contracts, the source said.

Odebrecht, who is seeking leniency to lower a 19-year sentence for corruption and money-laundering, said Temer did not directly request a donation at a dinner in 2014, though the matter was discussed in a general way.

The massive investigation into bribery and political kickbacks, dubbed Operation Car Wash, threatens to bring down members of Temer's inner circle and has generated political uncertainty that is undermining business confidence and prolonging Brazil's two-year recession.

Electoral court judge Herman Benjamin is seeking to determine if a 10 million reais ($3.2 million) contribution allegedly sought by Temer was paid from graft money, as claimed by another Odebrecht executive in plea bargain testimony.

Temer has said the donation was legal and duly registered, but Benjamin could recommend annulling the Rousseff-Temer ticket, which would lead to the president's removal and election of a new leader by Congress if it is upheld by the full court.

The graft scandal endangers Temer's efforts to push unpopular austerity reforms through Congress aimed at curbing a growing budget deficit that cost Brazil its investment grade credit rating in 2015.

"The President's biggest challenge now is to prevent the Car Wash investigation paralyzing his reform agenda in Congress," a Temer aide told Reuters, requesting anonymity because he was not authorized to speak about the government's worries.

The crisis will deepen in the next few weeks when Brazil's top prosecutor Rodrigo Janot will ask the Supreme Court to make public plea bargain statements of 77 Odebrecht executives who are expected to name up to one-third of Brazil's federal lawmakers for taking kickbacks.

Among the politicians at risk is Temer's chief of staff, Eliseu Padilha, who is on medical leave after prostate surgery but will have to face questions about a package of 1 million reais he allegedly requested as part an undeclared contribution from Odebrecht.

A lawyer and longtime friend of Temer's, José Yunes, has approached prosecutors to confirm the package was handed over at his office for Padilha but that he had no idea that it contained cash, leaving the chief of staff in a difficult position.

Source: Reuters

Odebrecht provided $3 mn to former Peruvian president's campaign, reports say

Brazilian construction giant Odebrecht provided $3 million to help finance former Peruvian President Ollanta Humala's 2011 campaign, media reports said Thursday.

The daily El Comercio and the weekly Caretas reported that former Odebrecht executive Jorge Barata revealed the contributions to Humala's campaign in a statement to investigators last month.

Source: EFE

Spanish King's brother-in-law sentenced to prison, sister fined in fraud case

The brother-in-law of Spain's king has been sentenced on Friday to six years and three months in prison over a corruption and fraud case that also involved his wife Princess Cristina.

A court in Palma de Mallorca fined the princess 265,088 euros ($282,252) but did not hand down a jail term for her involvement in the fraud, as she was exonerated from charges that she collaborated with her husband's tax evasion.

Former Olympic sportsman Iñaki Urdangarin, who married the sister of King Felipe VI in a lavish society wedding in 1997, was found guilty of participating in a plot to unlawfully derive financial benefit from public funds that were obtained and channeled through supposedly non-profit entities.

The court's three judges unanimously decided on a prison sentence of six years and three months for the former handball star, who was convicted on charges of obstruction of justice, embezzlement, fraud, influence peddling and two counts of tax evasion.

In addition, Urdangarin was fined 512,000 euros.

Spain's anti-corruption prosecutor had asked for a sentence of 26 years and six months' imprisonment for Urdangarin.

Meanwhile, Urdangarin's former business associate, Diego Torres, was sentenced to eight years and six months in prison and fined 1,723,843.10 euros.

Torres was found guilty of, among other crimes, defrauding the treasury by illegally transferring hidden income through an international web of shell companies based in the United Kingdom and Belize.

His wife, Ana Maria Tejeiro, was exonerated of all tax crimes but was fined 344,934 euros as a beneficiary of her husband's illicit enrichment.

On the other hand, the former regional president of the Balearic Islands, Jaume Matas, was sentenced to three years and eight months in prison for his role in the fraud scheme.

The Balearic government, under the control of the conservative Popular Party, had funneled public funds into Urdangarin and Torres' "non-profit" the so-called Nóos Institute to the tune of 2.3 million euros.

Urdangarin used his prominent position as the husband of the Duchess of Palma and a member of the Royal Family to secure public contracts from his acquaintances in various public bodies.

Nóos received more than three million euros from the regional government of Valencia and an annual contract worth 120,000 euros from Madrid's failed bid to host the 2016 Olympic Games.

King Felipe and his wife, Queen Letizia, were inaugurating an exhibit at Madrid's Thyssen museum when the verdict became known.

A spokesman for the Royal Office reacted to the news by re-affirming its "absolute respect for the independence of the judiciary power."

Princess Cristina's attorney, Miquel Roca, said the verdict was satisfactory as she was exonerated from the tax evasion charges, but said she was "dismayed" by Urdangarin's prison sentence because she "continues to believe in his innocence."

Source: EFE