June 30, 2005

Brazil’s Lula orders probe as graft scandals bite

By Axel Bugge

BRASILIA, Brazil (Reuters) - Brazilian President LuizInacio Lula da Silva opened a probe on Thursday into a stateenergy firm and unveiled anti-graft measures to fight the worstcorruption scandal to hit his government.

With a flurry of corruption accusations and investigationsof them beginning to snowball, Lula toughened up laws to crackdown on graft by making it easier to probe and imprison publicofficials on the take.

Anti-corruption offices will also be installed at everygovernment ministry and the public will be able to scrutinizepublic contracts on the Internet.

Lula's ruling Workers' Party has been under fire since thehead of a small party allied to the government, lawmakerRoberto Jefferson, accused the party of making cash payments tosome legislators to secure their support in Congress. TheWorkers' Party denies the allegations.

The scandal has called into question Lula's chances ofreelection next year and suspended passage of economic reformsin Congress, which is consumed by investigating the case.

Jefferson, who himself is accused of heading a briberyscheme at the state post office, made another accusation onThursday, saying in a newspaper interview that the Workers'Party received illegal payments from state-owned electricityfirm Furnas.

Workers' Party head Jose Genoino said his party "knowsnothing about this, we never had ties to Furnas."

The justice ministry said in a statement that on the ordersof Lula it "would immediately open an investigation to unearthaccusations printed in the press today relating to state firmFurnas Centrais Eletricas."

Three Furnas directors will be suspended from their jobsduring the investigation, the mining and energy ministry said.

Jefferson could give further details of the accusations onThursday afternoon when he is due to testify before acongressional commission. So far he has presented no evidencefor any of his allegations.

Lula, whose cabinet chief Jose Dirceu has resigned becauseof the accusations, has promised to root out graft from hisgovernment and has said he will not hesitate to get rid ofmembers of his own party if found to be corrupt.

"You will never be asked by the president to shelve anycase against anybody," Lula said in a speech at theinauguration of Brazil's new chief public prosecutor, AntonioFernando Barros e Silva de Souza.

Lula is trying to woo allied parties closer to thegovernment in an effort to increase his power in Congress.

On Wednesday a majority of lawmakers from the leadingBrazilian Democratic Party Movement said they would give Lula'sgovernment full support in return for Cabinet posts and a sayin public policies.

(Additional reporting by Tiago Pariz)