Brazil Former Minister Palocci Arrested in Carwash Probe

(Bloomberg) -- Brazilian police arrested Antonio Palocci Filho, who served as finance minister and chief of staff under former presidents Luiz Inacio Lula da Silva and Dilma Rousseff, as part of the so-called Carwash probe that has shaken the country’s business and political elite.

Prosecutors said in a statement there is evidence that Palocci interfered in decisions taken by the federal government to benefit Odebrecht SA, one of Brazil’s largest builders, between 2006 and 2013.

The move follows last week’s temporary arrest of Guido Mantega, former finance minister under Lula and Rousseff, and shows how police are encroaching on high-profile figures of the Workers’ Party just ahead of municipal elections in October. Former president Lula is also facing criminal charges in the same Carwash corruption probe, which has already landed behind bars key executives and leaders of Lula’s party.

A representative for Odebrecht declined to comment on the accusations. Palocci’s lawyer said his arrest was arbitrary. “Why is it necessary to arrest a person whose domicile is known, who has been minister twice, and who can provide all the information when called up? Is it to put on a show?,” Jose Roberto Batochio told journalists in Sao Paulo.

Prosecutors and police said there’s evidence that Palocci directly intervened to give economic advantages to Odebrecht in several bidding processes with the government, and that he and members of his “political group” benefited from large sums of illicit money given in return.

No Deal

Pouring cold water on expectations that Odebrecht was about to sign a plea bargain deal that would further implicate the country’s top politicians, prosecutors said there’s no agreement with the company even after several months of negotiations. 

Former chief executive Marcelo Odebrecht has been silent during all testimonies taken by police and his collaboration has been dispensable given the large number of proofs against him and his company found during the investigation, chief police officer Filipe Hille Pace told reporters in Curitiba, where Carwash investigators are based. 

Only one Odebrecht employee, a former secretary who was briefly arrested earlier this year, agreed to collaborate. “She was the only person so far to break the silence that reigns at Odebrecht,” Pace said.

--With assistance from Julia Leite and Yasmine Batista To contact the reporters on this story: Vinícius Andrade in São Paulo at vandrade3@bloomberg.net, Sabrina Valle in Rio de Janeiro at svalle@bloomberg.net. To contact the editors responsible for this story: Vivianne Rodrigues at vrodrigues3@bloomberg.net, Walter Brandimarte