State-owned companies involved in alleged vote-buying scheme

Monday, June 13, 2005

The Brazilian ruling Workers' Party (PT) has been accused of funneling cash from state-owned companies to buy votes in congress and trading nominations to top management positions for political support, local newspaper Folha de São Paulo reported.

Congressman Roberto Jefferson of the government-aligned Brazilian Labor Party (PTB) told the newspaper that the cash was used to pay as much as 30,000 reais (US$12,200) a month to lower house congressmen in exchange for support in controversial voting sessions.

The money came from "operations between state companies with private sector companies," Jefferson was quoted as saying.

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Treasurers and other top members of the PT coordinated the scheme, Jefferson told the paper. The PT has formally denied all of Jefferson's accusations and says it will sue him.

Local analysts say the accusations not only threaten to dampen Brazil's economic growth and delay investment decisions but could also bring congress to a standstill. This would delay voting on the nomination of hydrocarbons regulator ANP's new president, two directors at power regulator Aneel and a gas bill the government said it would send to congress soon.

The vote-buying scheme has been linked to political nominations to top posts in state-controlled companies. Such nominations are common in Brazil and used by governing political parties to rally support among allied parties in congress.

However, the allegations of widespread corruption and influence peddling involving the PT and PTB are sending shockwaves through state-owned power firms and other companies.

As a sign of the seriousness of the allegations, federally owned power company Eletronorte CEO Roberto Salmeron, a PTB member, resigned last week.

Jefferson said that the PT also negotiated the nomination of a director at state-owned power company Furnas and that the PTB had been negotiating the nomination of another Furnas director before the scandal broke.

Both Eletronorte and Furnas are controlled by federal power holding company Eletrobrás, whose president Silas Rondeau is linked to the Democratic Movement Party (PMDB), which has not so far been involved in the accusations.

Federal energy company Petrobras (NYSE: PBR) has not escaped unscathed from the scandal. Newspaper O Estado de São Paulo reported last week that several appointments at Petrobras gas and power subsidiary Gaspetro were politically motivated.

The corruption allegations arose when local media aired a video showing the manager of state-owned postal services company (ECT) Maurício Marinho receiving a 3,000-real bribe to help a company win a tender. Marinho said on the video that the cash would help PTB's coffers.

Another accusation involved a 400,000-real monthly payment to the PTB from reinsurance institute (IRB).

The top management of both ECT and IRB has been replaced and federal police are investigating the accusations.

Some local political analysts and the PT have suggested Jefferson's claims are part of a strategy to avoid being investigated himself for links to ECT's Marinho, which he has publicly denied.

The senate and the lower house have set up a joint parliamentary investigation committee (CPI by its Portuguese initials) to probe corruption in ECT and the lower house's ethics committee has started investigating the vote-buying accusations in congress.

Jefferson is scheduled to speak at a meeting of the ethics committee on Tuesday (June 14) and will be heard by the CPI.

Jefferson has no material proof of the accusations and has not yet named names, although a member of the opposition PSDB party said she received an offer of 1mn reais a year and 30,000 reais a month to support government measures.

Jefferson said the vote-buying scheme ended in January after he warned President Luiz Inácio Lula da Silva and other cabinet members.