MercoPress. South Atlantic News Agency

Brazilian Justice Minister sinking in scandal

Brazilian Justice Minister Marcio Thomaz Bastos Sunday denied any links to the scandal that a few days ago forced the resignation of once-all powerful and President Lula da Silva's closest aide, Finance Minister Antonio Palocci.

"It's a fabrication and totally unfounded" said Bastos in an official written statement rejecting a report in Brazil's main weekly magazine Veja.

According to Veja Mr. Bastos attended a meeting at Palocci's home to discuss how to save the now former minister from accusations of having violated bank secrecy regulations in retaliation against a caretaker who reported seeing him at parties with former aides where supposedly bribes were split among associates.

The Justice Ministry admitted that Bastos was at Palocci's house with attorney Arnaldo Malheiros Filho but said that his visit was to discuss "general matters" about the case of caretaker Francenildo Costa, whose bank accounts were illegally investigated and who was accused of money laundering after he said he had seen Palocci present in orgies organized in a mansion in Brasilia.

Costa said he had seen Palocci, one of President Lula da Silva closest aides, going to parties thrown by former colleagues at a Brasilia mansion frequented by prostitutes and businessmen and lobbyists cutting shady deals with the government. Despite Palloci's attempts to brush aside the accusations, Costa reiterated that he had seen him there "10 or 20 times".

Police investigators determined that secrecy governing bank accounts had been violated illegally in the case of the caretaker, and that the Finance Ministry and its savings institution, Caixa Economica Federal, were directly involved.

Caixa Economica Federal chief Jorge Mattoso admitted that the financial institution's employees violated bank secrecy regulations in releasing information about the caretaker's account and confirmed that the 20,000 US dollars deposits had been made. Government supporters contended the deposits were proof that Costa had been "bought" to accuse Palocci.

The release of the information, however, was illegal. Mattoso said he gave the copies of the bank statements to Palocci and then resigned. Results of police investigations forced Palocci to resign as well, and last week he was accused formally of abuse of power and corruption.

Veja said that the justice minister was at Palocci's home on March 23, four days before the finance minister resigned, together with Mattoso and Malheiros. According to Veja the aim of the meeting was "to find a formula to shield Palocci" stop him from leaving office. "The investigation of the Federal Police is proceeding completely independently and will clarify the participation of public officials in the matter," the statement said.

It added that "the work of the Justice Ministry and the Federal Police has been, throughout this government, marked by independence" and it emphasized that it would continue to be that way, regardless of who was implicated.

The possible role of Bastos in these affairs had been insinuated by opposition parties, who last week announced they would consider questioning the Justice minister in Congress. Bastos replied he was perfectly prepared to go at any moment to Congress to clear up his alleged participation in plotting to save Palocci, whom Lula defended tooth and nail even when he resigned.

Recent scandals are making president Lula da Silva unexpectedly vulnerable six months ahead of general elections when he is expected to bid for a second four year term.