Brazil police arrest 27 in widening Petrobras probe

Federal police enter a vehicle as they leave the headquarters of Brazilian conglomerate Camargo Correa during "Operation Car Wash" in Sao Paulo on Nov 14, 2014. Brazilian police arrested a former Petróleo Brasileiro SA executive on Friday, sending t
Federal police enter a vehicle as they leave the headquarters of Brazilian conglomerate Camargo Correa during "Operation Car Wash" in Sao Paulo on Nov 14, 2014. Brazilian police arrested a former Petróleo Brasileiro SA executive on Friday, sending the state-run oil company's shares and bonds down after a widening corruption scandal forced it to delay the release of its financial results. -- PHOTO: REUTERS

RIO DE JANEIRO (AFP) - Police made 27 arrests in raids across Brazil on Friday in a widening investigation into allegations of a multi-billion-dollar kickback scheme at the state-owned oil giant Petrobras.

Among those swooped on by 30 police teams that fanned out across the country was Renato Duque, the former Petrobras director of engineering and services, while several prominent construction companies have also now been dragged into the scandal that has touched the Brazilian president.

Authorities, under pressure to get to the bottom of the escalating crisis at Petrobras, also froze assets worth 720 million reais (S$360 million) belonging to 36 suspects and three unnamed companies.

After an early delay in trading on news of the police action, Petrobras stock slumped initially on the Sao Paulo market before ending the session 2.66 per cent off at 12.78 reais.

Petrobras - also the subject of an investigation by US authorities - had announced Thursday that it was delaying release of its third-quarter results because of "investigations regarding allegations of conspiracy, embezzlement and corruption."

According to former Petrobras director Paulo Roberto Costa, the company allegedly paid millions of dollars in kickbacks to politicians and members of the ruling Workers Party between 2004 and 2012 to buy influence in what critics say was a collusion between Petrobras and politicians.

Costa, who is under house arrest, has been acting as whistleblower as part of a plea bargain with prosecutors.

The allegations roiling Petrobras have been dubbed "Operation Car Wash."

Police estimate more than 10 billion reais of kickbacks were made in all.

Nobody has been convicted, but Costa is awaiting trial over the allegations that forced President Dilma Rousseff into denials in a hotly contested election that she won last month after a bitter runoff.

Many more are expected to follow Costa into court as the case unravels.

WIDENING CRISIS

Friday's arrests on suspicion of money-laundering and fraud were made in five states and the capital Brasilia. Some of those police detained were top executives from top construction firms who had allegedly signed suspect contracts with Petrobras.

Money dealer Alberto Youssef, detained along with Costa in March, claimed last month in testimony to investigators published by news magazine Veja that Rousseff and predecessor Luiz Inacio Lula da Silva knew about the kickbacks scheme.

Both angrily denied knowing anything about a racket which allegedly started shortly after the ruling Workers Party took power in 2003.

Rousseff, a former board chair of Petrobras who served as energy minister under Lula, threatened to sue Veja over its claims, which now are the subject of an investigation by the courts as well as Congress.

Brazilian financial markets reacted badly to the latest arrests. The main Ibovespa index limited losses to 0.14 per cent, ending the week at 51,772 points - giving up 2.7 per cent on a turbulent week overall.

On the currency markets the Brazilian real, having hit a nine-year low on Thursday against the dollar, slipped another 0.27 percent to 2.6 to the US unit.