Police arrest ex-finance minister in graft probe

Brazilian police on Monday arrested Antonio Palocci, a powerful former finance minister and presidential chief of staff in recent Workers Party governments, as a sweeping anti-corruption probe hit even harder at the left-leaning party, known by its acronym PT.

Prosecutors said at a news conference that Palocci acted as a liaison between the 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 Petroleo Brasileiro SA, or Petrobras.

"Evidence has surfaced ... that he was responsible for coordinating his political party's receipt of surreptitious payments from the Odebrecht Group," read Monday's 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 128 million reais ($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.

Two former aides of Palocci were arrested in Monday's police sweep.

A medical doctor by training, Palocci was former president Luiz Inacio Lula da Silva's finance minister and a key player in the 2002 election campaign that put the union and PT leader in the presidential seat.

He also served as chief of staff to Lula's handpicked successor, Dilma Rousseff, ousted last month in an impeachment trial that ended 13 years of PT rule. Rousseff on Monday warned that Brazil faces a severe crisis as corruption arrests continue.

"The country is experiencing a severe situation. The announcement of the new phase of Operation Car Wash (the Petrobras investigation) by the Minister of Justice Alexandre de Moraes in an electoral campaign ... raises suspicions of abuse of authority and political usage of the federal police," Rousseff said.

Rousseff was referring to declarations made on Sunday by Moraes, who promised "more actions" this week concerning the Petrobras investigation.

Rousseff was succeeded by her former vice-president Michel Temer, whose political and economic policies have veered sharply to the right.

Palocci's lawyer did not immediately respond to requests for comment about Monday's accusations.