Brazil ruling party treasurer arrested in Petrobras probe

The treasurer of Brazil's ruling party was arrested Wednesday for alleged money laundering and taking bribes from state oil giant Petrobras that were stuffed into backpacks, the latest blow to President Dilma Rousseff.

Police accused Joao Vaccari of being the Workers' Party (PT) point man in a massive kickbacks scheme in which Petrobras executives colluded with construction companies to inflate contracts to the tune of $4 billion, passing some of the dirty cash to the PT and its allies.

The arrest ups the pressure yet again on Rousseff, who is facing calls for her impeachment and approval ratings of just 13 percent only four months into her second term.

Rousseff chaired the Petrobras board during much of the decade when the alleged corruption took place, though she has not been implicated in the scandal.

Vaccari, who denies any wrongdoing, was arrested in the financial capital Sao Paulo as he prepared for his morning walk, police said.

He was transferred to the southern city of Curitiba, where a judge is leading the probe into the Petrobras case.

Prosecutors said they requested his arrest "to stop a series of crimes and because of the gravity of the crimes in which he participated intensively, which involve millions of reals."

They said in a statement they also wanted to prevent him from "exerting political influence to obstruct the investigation."

Police questioned Vaccari's wife, Giselda Rousie Lima, who is being investigated as an accomplice.

They also have a warrant for his sister-in-law Marice Correia Lima, who is under investigation for money laundering over the purchase and sale of an apartment linked to the scandal.

- Backpacks full of cash -

Vaccari is one of the biggest names targeted in the investigation, in which some three dozen other politicians have been accused.

The scandal hits at the core of the PT, which surged to power in 2003 with a promise to shake up Brazilian politics.

Investigators are now probing to what extent illicit cash has funded the party's operations while in power, including Rousseff's first election campaign in 2010.

Five suspects accused of involvement in corrupt practices at Petrobras who have turned state's witness have told investigators that Vaccari was the PT's point man in the scheme.

The witnesses accuse Vaccari of transporting backpacks full of Petrobras cash, illegally using bank accounts in his relatives' names, meeting with black-market financiers and funneling illicit funds to the PT.

The party denies any wrongdoing.

"We reaffirm our confidence in Joao Vaccari Neto's innocence, not only because of his conduct, but because in a democratic state everyone has the fundamental right to be considered innocent until proven guilty," it said in a statement.

It said Vaccari had asked to be removed from his post "for practical reasons," but did not say if the request was accepted.

Prosecutor Carlos Fernandes Santos Lima said investigators found "unidentified deposits" for more than 300,000 reals ($100,000) over three years in bank accounts belonging to Vaccari's relatives.

Besides evidence that Vaccari ran the PT's end of the Petrobras kickbacks, "we have evidence that this scheme was repeated at other companies," including both state-run and private firms, Lima said.

The scandal has taken a heavy toll on Petrobras, the largest company in the world's seventh-largest economy.

Its chief0 executive and board of directors resigned in February, after the company lost nearly $9 billion in stock value after being downgraded by two ratings agencies.