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Investigation Could Taint Image of Brazil's Former President

FILE - Brazil's President Dilma Rousseff (R) and her predecessor, Luiz Inacio Lula da Silva, wave to supporters during a campaign rally in Sao Paulo, Oct. 3, 2014.
FILE - Brazil's President Dilma Rousseff (R) and her predecessor, Luiz Inacio Lula da Silva, wave to supporters during a campaign rally in Sao Paulo, Oct. 3, 2014.

An investigation into allegations that former Brazilian President Luiz Inacio Lula da Silva's peddled his influence on behalf of construction firm Odebrecht could taint his image and weaken the ruling Workers' Party, analysts said Friday.

The federal prosecutor's office announced the investigation Thursday — apparently the first time the enormously popular ex-president has been linked to a criminal investigation, though many aides have been accused in corruption cases.

The prosecutor's office said it's trying to determine if Silva was paid to sway foreign leaders into awarding inflated contracts to Odebrecht and push Brazil's state development bank to give the company well over $1 billion in low-interest loans. The alleged incidents came after he left office.

Under Brazilian law, influence peddling to obtain advantages from a public servant or institution is illegal.

The prosecutor's office said that Silva's efforts helped Odebrecht obtain contracts to build infrastructure projects in Panama and Venezuela and that there were "strong indications'' that the former president also helped the company get contracts in several other countries.

The Sao Paulo-based Lula Institute has said the former president denies any wrongdoing and that the investigation took him by surprise.

"It is a completely irregular, untimely and unjustified procedure,'' the institute said in a statement. "We will take all the necessary legal measures to correct this arbitrary act.''

Political scientist Rosemary Segurado of Sao Paulo's Catholic University said the probe could weaken the Workers' Party and hurt its chances in the 2018 elections.

The probe is the first time Silva's name has come up in connection with a criminal investigation, Segurado said. And she added it could worsen the crisis for Silva's handpicked successor, President Dilma Rousseff, whose popularity has plunged amid political and economic turbulence, including what prosecutors say is the biggest corruption scheme yet uncovered in Brazil — a sprawling system of kickbacks at state-run oil company Petrobras.

The new investigation into Silva is separate from the Petrobras case, and neither he nor Rousseff has been implicated in that scandal. It allegedly saw Odebrecht and several other major construction and engineering firms pay bribes to oil company executives in exchange for winning inflated contracts.

Prosecutors allege that some of the money was funneled back to the campaign coffers of the Workers' Party and its allies. More than 50 political figures, including 33 members of Congress, are being investigated in the Petrobras case.

Marcelo Odebrecht, the president of Odebrecht, was taken into custody one month ago for alleged involvement in the Petrobras scheme. He faces charges of forming a cartel, money laundering and diversion of public funds.

Political scientist Segurado said the crisis deepened Friday when the speaker of the Chamber of Deputies, Eduardo Cunha, announced he would no longer support Rousseff's government.

Cunha, whose Brazilian Democratic Movement is the main party in Rousseff's governing coalition, told reporters the government was pressuring prosecutors to link him to the kickback scandal at Petrobras.

His announcement came one day after the revelation that a defendant who turned state's evidence said Cunha had taken $5 million in bribes. Cunha has denied the allegation.

Rousseff's office said the same in a statement, adding it was confident Cunha would remain impartial in his role as speaker of the lower house. Cunha, however, said Thursday that he was studying legal arguments for Rousseff's possible impeachment for alleged campaign finance irregularities.