Peru Opposition Leader Keiko Fujimori Held on Graft Charges

(Bloomberg) -- Peruvian opposition leader Keiko Fujimori was arrested by police Wednesday on allegations she received illicit campaign financing, marking an unexpected turn in a year-long probe of the two-time presidential candidate.

A court approved her detention for 10 days, arguing she posed a flight risk and could obstruct the prosecutors’ investigation, Peru’s judiciary said via Twitter on Wednesday. She was ordered detained along with 19 other people including her former campaign chief Jaime Yoshiyama.

Peru Opposition Leader Keiko Fujimori Held on Graft Charges

The decision marks the second high-profile judicial move against Peru’s influential Fujimori family in a week, and yet another twist to a tumultuous year for the country. Last Wednesday, a court ordered the imprisonment of autocrat Alberto Fujimori, Keiko’s father, after overturning a political pardon.

Prosecutors are probing accusations that Keiko, who was a runner-up in Peru’s last two presidential elections, received illicit donations from Brazilian builder Odebrecht SA for her 2011 campaign. That firm is at the center of the Carwash bribery investigation, which has ensnared Peru’s last four heads of state. Former President Pedro Pablo Kuczynski resigned in March after facing allegations that a firm he owned also took money from Odebrecht SA, which has doled out millions of dollars in bribes across Latin America.

‘Lost Power’

Fujimori denied receiving any money from that company when prosecutors began the probe last year and said at the time the accusations were part of a campaign against her. Her party, Popular Force, is the biggest in Congress, though it has shown signs of division in recent months as her popularity waned. Prosecutors are also investigating allegations Fujimori met with a supreme court judge to discuss the case against her.

“She’s lost power, and the majority she has in Congress is precarious,” said Fernando Rospigliosi, the head of Lima-based consultancy FRC Consultores. “This weakens Congress and especially Popular Force, whose capacity of reaction and response is now very limited.”

‘Unjust and Arbitrary’

While prosecutors have been making progress in several probes tied to the Odebrecht case, Fujimori’s arrest was unexpected, Rospigliosi said.

The former congresswoman was detained as she went to testify before prosecutors in downtown Lima, her lawyer Giuliana Loza told the Canal N network. Fujimori’s husband Mark Vito Villanella, who was with her at the time of her arrest, told reporters her detention was politically motivated. Prosecutors have no proof of any wrongdoing, he said.

Popular Force said in a statement it will appeal the court’s decision. Fujimori isn’t a flight risk as she has always cooperated with the justice system since entering politics 18 years ago, it said.

“We’ll appeal and demonstrate this detention is unjust and arbitrary. It’s clear that this is political persecution against our leader,” the statement said.

While the short term economic impact of Fujimori’s detention likely will be limited, political risks have intensified, analysts at Chilean brokerage LarrianVial wrote in an emailed note to clients.

“We expect the legislative branch to exert greater scrutiny of government actions, thus diverting government focus and slowing down infrastructure works,” they wrote.

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