Brazil's Capital on Edge Amid Uncertainty Over Graft Probe

(Bloomberg) -- Brazilian politicians worried they could be swept up in the next round of a devastating three-year corruption probe may have to sit tight just a bit longer to find out.

Chief prosecutor Rodrigo Janot may ask the Supreme Court as early as Monday to authorize new inquiries into lawmakers based on secret testimony from executives at construction firm Odebrecht SA. Some of these businessmen have separately been convicted of paying bribes and financing political campaigns illegally.

Yet the Supreme Court will take time to register, classify and process what local media have dubbed the "end of the world plea bargain" testimony, according to a person with direct knowledge of the court´s workings and who requested anonymity because the issue is not public. Over the weekend the Estado de S. Paulo newspaper reported the seal on the evidence would not be lifted before the end of the month.

Some of the country’s most powerful politicians have been on edge for months as part of the testimony leaked to the press, revealing allegedly wide-spread payments to legislators, governors and party leaders, including aides to President Michel Temer. The president and his closest advisers have denied any wrongdoing.

The decision to publish the voluminous accounts by dozens of Odebrecht executives rests with Supreme Court Justice Edson Fachin, who only took over as the lead judge on the case after Teori Zavascki was killed in a plane crash in January.

Late last week the Supreme Court asked media organizations to hand over a two tetrabyte hard drive - enough for thousands of hours of video testimony - to download the material. Though the court has yet to deliver the data, the request sparked panic among legislators, some of whom called journalists to find out if they had been named, local media reported.

At stake is to what extent the latest phase in the so-called Carwash anti-corruption drive could derail Temer´s reform agenda in Congress. His government’s proposals to cut pension outlays and deregulate the labor market are considered essential in pulling Latin America´s largest economy out of recession and helping restore its investment grade credit rating.

Temer has already lost several ministers over allegations of wrongdoing and his chief of staff, Eliseu Padilha, who has been cited in relation to the scheme of kickbacks, has been on medical leave for the past few weeks. He has repeatedly denied any wrongdoing and returned to work on Monday morning, according to his press office.

Temer said in February he would temporarily remove any cabinet member under investigation, meaning he may well lose further aides in coming weeks. A trial could take months and a verdict may not happen before Temer´s term finishes at the end of next year.

While fresh allegations and probes are certain to create noise, they won´t diminish the 80 percent chance of Temer finishing office or the 70 percent probability of approving pension reform, Eurasia Group political consultancy said in a report last week.

Not only have Odebrecht executives avoided directly implicating Temer but also legislators wary of what a deeper economic crisis could spell for them in next year´s general elections are likely to support the president´s reform drive.

Carwash has landed dozens of the country’s top business leaders in jail since the investigation kicked off roughly three years ago.

Of the 50 politicians Janot requested to be probed two years ago, only a handful are facing trial before the Supreme Court. Under Brazilian law, cabinet ministers, federal senators and congressional deputies can only be tried by the nation’s top court.

To contact the reporters on this story: Raymond Colitt in Brasilia at rcolitt@bloomberg.net, Priscilla Murphy in Brasilia Newsroom at pmurphy134@bloomberg.net.

To contact the editors responsible for this story: Daniel Cancel at dcancel@bloomberg.net, Bruce Douglas, Matthew Malinowski