MercoPress. South Atlantic News Agency

Corruption probe encroaching on Lula's administration

Brazilian opposition leaders announced that President Luiz Inacio Lula da Silva will be included in the months-long corruption probe, following revelations that money diverted from a government managed bank funded a network of illegal payments by the ruling Workers Party, PT.

"We found the trail by which money from government ended as PT's slush funds. Clearly it shows how public funds were used for private interests" said Friday Senator Alvaro Dias from the opposition Brazilian Social Democracy Party (PSDB).

Senator Dias demanded that evidence of irregularities uncovered by the Congressional Investigation Committee be immediately presented to the Attorney General's office, so prosecutors can begin a criminal investigation of Lula's administration.

Based on the findings of the legislative committee investigating corruption allegations, ten million reais (approximately 4.5 million US dollars) was diverted from the state-run Banco do Brazil to the ruling party PT.

The diversion of funds was announced Thursday by Lower House member Oscar Serraglio who heads the committee investigating the alleged PT network for financing political campaigns and ensuring votes in Congress.

Banco do Brazil has acknowledged that last October it opened an internal investigation to probe the diversion of funds "loaned" to an advertising agency linked to the PT. "We discovered that the loans were part of an operation to divert money from the bank to PT through public relations expert Marcos Valerio" indicated Mr. Serraglio.

Mr. Valerio revealed before a Congressional committee that during 2003 and 2004 he collected the equivalent of 22 million US dollars for PT Treasurer Delubio Soares, part of it "loaned" through the Bank of Brazil.

Opposition leaders said that following four months of investigations, they had finally found the evidence they were looking for: evidence that financial irregularities were not limited to illegal campaign financing, as the PT has repeatedly contended.

"The evidence shows diversion of public funds to benefit the ruling party. Now, all President Lula administration officials are under suspicion" said Senator Arthur Virgilio do Carmo from the opposition PSDB.

Senator Alvaro Dias said the opposition so far had focused its attacks on the PT and had been lenient towards Lula, but the new revelations "have shown a completely new picture".

Folha do Sao Paulo reports that a close presidential advisor admitted President Lula was "concerned" because most probably the conclusions from the Congressional investigation committee are "truthful".

However he insisted President Lula was unaware of the illegalities and blamed PT treasurer Soares for the slush fund network operation.