Brazil arrests senator, bank CEO over Petrobas corruption probe

Brazilian police on Wednesday arrested a senior ruling party senator and a billionaire investment banker in the intensifying probe of a huge corruption network centered on state oil giant Petrobras.

Senator Delcidio Amaral, who leads President Dilma Rousseff's Workers' Party in the upper house, was the first sitting legislator to be arrested in the widening corruption scandal.

"He is in preliminary detention. He was detained in Brasilia and has already arrived at the police station," a press officer for the attorney general's office told AFP.

Police in Rio de Janeiro also arrested BTG Pactual investment bank CEO Andre Esteves, who is estimated by Forbes magazine to have personal wealth of some $2.2 billion, overseeing about $200 billion in assets. Search warrants were issued for residences and offices in Brasilia, Sao Paulo, Rio and Mato Grosso.

Both men, and a lawyer who was also arrested, are suspected of obstructing investigations into the Petrobras bribes and kickbacks scheme, said the Supreme Court, which has to authorize any arrests of sitting members of parliament.
According to prosecutors, Amaral was recorded suggesting to the son of the imprisoned former head of Petrobras' international division, Nestor Cervero, that he should not cooperate with authorities.

Amaral even told the son that he could help Cervero flee to Spain with payments of about $13,500 a month for his family, a spokesman at the Supreme Court told AFP. Cervero has agreed to cooperate with prosecutors in hopes of being given a lighter sentence, which could be as much as five years.

The Petrobras scandal, in which executives colluded with politicians and businessmen to rob the company through bribes for rigged contracts, cost the company more than $2 billion.

- President's woes pile up -

Although President Dilma Rousseff and her powerful predecessor Luiz Inacio Lula da Silva (2003-2010) have not been named in the probe, their Workers' Party has come under growing fire.

Amaral's detention came one day after authorities arrested Jose Carlos Bumlai, a rancher reportedly close to Lula.

Other senior politicians -- including former president and current Senator Fernando Collor de Mello and lower house speaker Eduardo Cunha -- face Petrobras-related corruption charges, but unlike Amaral they remain free pending investigation.
Claudio Goncalves Couto, at the Getulio Vargas Foundation, a think tank, said the loss of Amaral would be a major short-term blow to a government struggling to get economic reform measures through Congress.

"When the government is already not working very well and then the central person in the process is arrested, they have to start all over again," he told AFP.

On the plus side, the arrests of such powerful men demonstrate something more hopeful for Brazil, the analyst said.

"The country is changing," he said. "A situation like this shows that it doesn't matter if you are a senator or big banker -- you can go to jail. This is the good news."

Markets fell on news of the arrests, especially that of Esteves, as they underlined how the damage from the Petrobras scheme has yet to bottom out. The new arrests came at a time when the world's seventh biggest economy is already suffering steep recession and political paralysis.

The Sao Paulo stock market tumbled 2.58 percent and the national currency, the real, was down 1.67 percent.

"It's truly worrying because (Esteves) was a very respected figure in the financial markets and was involved in many negotiations with the BNDES development bank, with companies, and this raises investors' fears," said Angelo Larozi, an analyst at Walpires Corretora. BNDES stands for Brazilian Development Bank.