CORRUPTION-BRAZIL: More Heads Roll as Crisis Deepens

By Mario Osava Reprint | | Print |

Analysis by Mario Osava

RIO DE JANEIRO, Jul 22 2005 (IPS) - The crisis facing Brazil’s ruling leftist Workers Party (PT) and President Luiz Inácio “Lula” da Silva has progressively deepened over the last seven weeks, as a growing number of government figures are toppled by the emergence of further evidence of large-scale corruption.

Bank documents currently under investigation by a congressional inquiry commission, the attorney general’s office and the federal police are exposing a web of illegal financial operations of alarming dimensions.

The ongoing scandal has already led to the resignation or removal of over 40 public figures, including ministers, lawmakers, party leaders and officials from state-run companies.

It is becoming increasingly difficult for Lula to maintain a state of governability, despite the efforts to keep the scandal from directly affecting him and his own personal popularity, which has remained high, according to the polls.

Some opposition forces, like the Liberal Front Party (PFL), have taken to explicitly attacking Lula for either ignoring or conspiring in the illegal operations now being uncovered.

Senator Arthur Virgilio Ribeiro, leader of the opposition Brazilian Social Democratic Party, has stated that Lula is either “idiotic or corrupt” – in other words, he was either totally blind to what some of his closest associates were up to, or was acting in complicity with them.

Given the scope of the irregularities committed around him, the claim that he was fully unaware of them has become ever less credible.

He opened himself up to further attack by stating in a recent television interview that the irregular campaign funding activities undertaken by the PT are something done “systematically” by all parties in Brazil.

The defensive manoeuvres adopted by the PT leadership have either been refuted by the facts or have proved extremely unconvincing.

The individuals responsible for raising and distributing undeclared campaign funds initially claimed that they had come from bank loans totalling 39 million reals (16.5 million dollars), used for paying off debts and covering new electoral campaign expenditures in 2003 and 2004. But the total sum involved is much higher, according to the bank records.

Tens of millions of reals were withdrawn from at least three banks and distributed in cash.

Green Party lawmaker Fernando Gabeira joked that those in charge of these operations were “computer illiterate incompetents” who believed that by avoiding the use of cheques and other signed documents, they would not be leaving a trail, ignoring the fact that there would be electronic records of all these transactions.

For the moment, it has been confirmed that over 30 million reals (12.7 million dollars) were withdrawn by 46 people from accounts at the Banco Rural registered to two advertising firms, DNA and SMPB, which were apparently used as a sort of unofficial PT “treasury”.

The cheques drawn on the accounts were made out to the companies themselves, and the resulting cash was distributed by the bank to previously authorised individuals. The ruse did not succeed in concealing the identities of the beneficiaries, whose names were recorded by the bank and by the building’s electronic security equipment.

Some of the names revealed include leaders of parties allied with the PT. This fact backs up the allegations made by lawmaker Roberto Jefferson, who unleashed the corruption scandal in early June by accusing the PT of bribing legislators from other parties in return for their support for congressional initiatives.

But in addition to top officials from conservative, PT-allied political parties – namely the Liberal Party (PL), Progressive Party (PP) and Brazilian Labour Party (led by Jefferson himself) – the recipients included state-level leaders of the PT itself, as well as a few surprises.

For example, the wife of the former speaker of the Chamber of Deputies, Joao Paulo Cunha, collected 50,000 reals (21,200 dollars).

This revelation sealed the fate of congressman Cunha, a former PT heavyweight, as it confirmed allegations that he had used favouritism in granting SMPB a contract with the Congress, aimed at bolstering his own campaign to run for governor of the state of Sao Paulo.

The head of the PT bloc in Congress, Paulo Rocha, had received a payout ten times greater and was forced to resign on Thursday.

The investigations currently underway could likely spark new scandals, particularly with regard to government advertising expenditures, which reached record highs last year.

And there are still a great many documents to be examined from the three banks most heavily used as part of this scheme, the Banco Rural, Banco do Brasil and Banco de Minas Gerais.

With their testimony to the congressional inquiry commission this week, former PT treasurer Delubio Soares and former PT secretary general Silvio Pereira merely heightened suspicions as to the full scope of the scheme, and were accused of lying by some of the commission’s members.

Soares claimed sole responsibility for the unreported campaign funds, maintaining that no one else had participated in obtaining and distributing the money involved or was even aware of its existence, a claim that many observers find implausible.

Soares did not explain where these off-the-books funds had originated, nor how the bank loans allegedly taken out will be repaid, and he refused to name the people who had received the money.

Some believe that Soares admitted to the lesser crime of using undeclared campaign funds to avoid answering for the greater crime of corruption entailed by the alleged bribery scheme.

There is a growing belief, even within some sectors of the PT, that such hedging tactics will prove fatal to the party and the government, as they simply serve to draw out the scandal that is slowly eating away at the prestige of the PT and Lula himself.

PT Senator Saturnino Braga called on Soares to “excise this tumour,” arguing that only a confession of “the whole truth” can save the party and the government.

These stalling manoeuvres fuel suspicions that the money involved stems from state companies and fraudulent contracts, which would imply such a staggering degree of corruption that the entire government would come under suspicion. If these allegations proved true, a full confession would be suicidal.

As the crisis rages on, legislative activity has been brought to a practical standstill, with the looming threat of an economic crisis. To ward off this danger, Senator Jefferson Peres of the opposition Democratic Labour Party has proposed a pact among “responsible political leaders” from all of Brazil’s major parties.

His recommendations include setting a deadline for the completion of the investigations into corruption, putting on hold any discussion of whether or not Lula should be allowed to run for re-election, and adopting wide-ranging political reforms and economic measures to lower sky-high interest rates and undertake fiscal adjustments.

Lula’s popularity ratings remain high, which means that an attempt to remove him, combined with an economic crisis, could trigger “social upheaval,” the senator warned.