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LatinNews Daily - 4 August 2015

Brazil’s Dirceu arrested, PT starts to panic

Development: On 3 August José Dirceu, the former cabinet chief of Brazil’s former president Lula da Silva (2003-2010), was arrested, accused of being the mastermind behind the corruption scandal at state-owned oil company Petrobras.

Significance: Dirceu’s arrest puts Lula, the ruling Partido dos Trabalhadores (PT) and, by extension, President Dilma Rousseff back in the firing line, ahead of nationwide protests called for 16 August. Dirceu was the mastermind of the ‘mensalão’ scheme, the cash-for-votes scandal that operated in 2003-2005 and badly damaged the Lula government. Already under house arrest in Brasília as he completes the final years of his sentence over the mensalão, Dirceu now faces being transferred to a prison in Curitiba, in the southern state of Paraná, where ‘Operation Car Wash’, the official investigations into corruption at Petrobras is based. The question now is whether Dirceu will implicate Lula in return for a lighter sentence.

  • According to federal prosecutors, based on testimony from some of the plea bargainers already arrested, Dirceu appointed Renado Duque to become director of services at Petrobras. From that point on, the ‘petrolão’ scheme, by which construction companies colluded and overbid on Petrobras infrastructure projects, with the surplus cash going to corrupt executives and politicians, became institutionalised. While Dirceu was not accused of benefiting personally from the mensalão scheme, it is alleged that he received R$39m (US$11m) from the petrolão operation between 2006 and 2013.
  • Alongside Dirceu in the latest, 17th phase of ‘Operation Car Wash’, a Petrobras engineer and a lobbyist were also placed in preventative detention; a further five were held under temporary arrest, including Dirceu’s brother, Luiz Eduardo de Oliveira e Silva. Oliveira was Dirceu’s partner in his consulting firm JD Consultoria, which was allegedly used to launder the petrolão bribes as fees.
  • As most of the evidence implicating Dirceu was gathered from prisoners seeking lighter sentences, the PT is now seriously concerned that those under arrest will seek to connect Lula with the scheme. According to some party members quoted in Estadão newspaper, federal prosecutors have told some of those in preventative detention that if they hand over the former president, they will get out quickly. In particular the PT fears that João Vaccari Neto, the former party treasurer under arrest, Oliveira, and possibly Dirceu himself, may now implicate Lula.
  • Already the opposition is seeking to pile on the pressure. Senator Aloísio Nunes, from the Partido da Social Democracia Brasileira, said that the arrest of Dirceu showed the operation was getting “very close” to Lula and Rousseff. The leader of the Democratas party in congress, Mendonça Filho, said the latest developments showed the PT was a “criminal organization”.
  • The party is due to meet today (4 August) to discuss its response to Dirceu’s arrest. After a small parliamentary recess, the government had hoped to relaunch with a new campaign to “humanise” Rousseff, putting her on TV more to get her message across. The government had also hoped that the recent bribery allegations against Eduardo Cunha, the president of the lower chamber of congress and a perennial thorn in the executive’s side, would make it easier to pass its legislation. Both plans now appear to be in tatters.

Looking Ahead: In recent weeks, Lula had jokingly told reporters that he expected to be the next to be arrested by ‘Operation Car Wash’. Now that comment is starting to look like a prediction. There are rumours that should that happen Lula might take advantage of his Italian citizenship, acquired through marriage, to flee the country.

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