MercoPress. South Atlantic News Agency

More corruption allegations in Lula's inner circle

A Brazilian Federal Police report strongly recommends a former minister and close advisor of President Lula da Silva be indicted for taking undue advantage of his position to discredit a witness who accused him of links to corruption.

According to Brasilia judicial sources quoted Monday in the press, former Finance minister Antonio Palocci, much admired for his command of the economy and who stepped down last March in the middle of an alleged corruption scandal, illegally obtained and leaked bank records of a man who accused him of active and regular participation in sex and alcohol orgies at a mansion in the country's capital.

The five months investigation compiled in a 2.000 page report was submitted Monday to a federal judge hearing on the matter.

Francenildo Costa, who was the caretaker and watchman of the mansion, alleges that Mr. Palocci not only participated with other civil servants, businessmen and prostitutes in the "wild parties", but was also involved in business and private interest dealings which included associates from the time he was an elected mayor in an industrial city close to Sao Paulo.

Following Costa's revelations to a local newspaper details of his bank account were leaked to the media in an effort to show he had been bribed to discredit Palocci who flatly denied having ever visited the mansion.

The bank account was in the Caixa Economica Federal, a savings institution directly controlled by the Finance ministry, and Caixa's then-chief executive, Jorge Mattoso, acknowledged to police that Palocci had access to the illegally obtained bank summary.

Already facing other allegations of corruption, Palocci resigned last March amid the uproar over his apparent abuse of power in the Costa matter.

In addition to the former minister, the Federal Police report urges prosecution of former Caixa boss Mattoso and journalist Marcelo Netto, a one-time press aide to Palocci.

Palocci is currently campaigning for a Congressional seat in October first elections for the Workers Party of President Lula da Silva who is running for re-election.