Brazil’s Lula accused of heading corruption network at state oil firm

Hopes of a comeback by the most popular president in Brazil’s history, Luiz Inácio Lula da Silva, were severely set back on Wednesday after Brazilian prosecutors accused him of being the “top commander” of the huge “Lava Jata” (carwash) corruption network that cost state oil company Petrobras millions of dollars.

Prosecutors claim that Lula, who is hoping to stand for re-election in 2018, is guilty of corruption, money laundering and receiving bribes from construction company OAS, one of the engineering and construction firms at the center of the Petrobras scandal. His wife, Maria Letícia,is also accused of direct involvement.

Investigators say Lula must have known of corruption at Petrobras

Prosecutors say Petrobras’s total losses stemming from the inflated contracts amount to some $12.7 billion.

“Without Lula’s decision-making power, this network would have been impossible,” said public prosecutor Deltan Dallagnol, having described the president who ran the country between 2003 and 2010 as “the conductor of this criminal orchestra”.

“After taking over as president, Lula ordered the creation of a criminal scheme to siphon off public money for his personal enrichment, to stay in power by criminal means, to buy parliamentary support, and to finance very expensive electoral campaigns,” said Dallagnol during a two-hour press conference.

The two-year-old “Operation Carwash” anti-corruption investigation, based in the southern Brazilian city of Curitiba, has uncovered how political appointees named by Lula’s Workers Party (PT) and its allies handed out overpriced contracts to engineering firms in return for illicit party funding and bribes.

The scandal contributed to the fall from power last month of Lula’s chosen successor, Dilma Rousseff, who was impeached by Congress in a separate case of breaking budget rules, amid rising anger over her handling of Brazil’s worst recession since the 1930s.

A hero of Brazil’s poor, Lula’s policies helped millions escape poverty 

As well as receiving $1.1 million, Lula is accused of accepting a luxury apartment in Guarujá on the coast of São Paulo from OAS. Lula has denied ownership of the three-floor condo, and his lawyers have dismissed the charges as a political plot to stymie his political comeback.

OAS was one of several leading Brazilian companies that allegedly overcharged the oil giant for contracts and split the extra money with corrupt Petrobras executives while setting aside some of the loot to pay off politicians who provided cover for the graft.

The same construction company also paid the rental fees for a warehouse where, over a period of five years, Lula stored the gifts he received during his 2003-2010 presidency, Dallignol said.

Prosecutors say total losses at Petrobras from  inflated contracts amount to some $12.7 billion

Those benefits were payment for three refinery contracts totaling some $26.4 million that were illegally awarded to OAS, Dallagnol added.

Lula has separately been indicted by a court in Brasilia for obstruction of justice in a case related to an attempt to persuade a defendant in the Petrobras scandal not to turn state’s witness.

The former shoeshine boy and union leader who led nationwide strikes against Brazil’s military dictatorship during the 1970s and 1980s, contributing to its downfall, was elected the nation’s first working-class president in 2002 after three failed campaigns.

A hero of Brazil’s poor, Lula implemented social policies that helped millions escape poverty and join the middle classes. He left office in 2010 with an 83% approval rating and an economy growing at more than 7% annually.

But two years ago, as the Petrobras probe became public, prosecutors began to close in on the former president.

Investigators charge it is not possible that Lula was unaware of the institutionalized corruption and political kickbacks taking place at Petrobras and other state-run companies before and during his mandate.

English version by Nick Lyne.