Federal prosecutors in Brazil confirmed Monday that they are weighing whether to open a full investigation into former President Luiz Inacio Lula da Silva's alleged overseas lobbying efforts for the scandal-plagued construction firm Odebrecht, the nation's biggest builder.
In an emailed statement, the federal prosecutors' office said it has 90 days to decide whether to begin a full inquiry into whether Silva engaged in "influence peddling" by allegedly swaying foreign leaders to award inflated billion-dollar contracts to Odebrecht, and by pushing Brazil's state development bank to give the company well over $1 billion in low-interest loans since 2011, after he left office.
Such a crime could carry a sentence of up to five years in jail.
The prosecutor's look into Silva was first published by news magazine Epoca over the weekend. The magazine reported that Silva's efforts focused on projects in Cuba, the Dominican Republic, Ghana and Venezuela, where Odebrecht has won big contracts for a variety of work, such as the Mariel port revitalization in Cuba.
The news comes at a delicate moment for the Workers' Party Silva helped found and for his hand-chosen successor, President Dilma Rousseff, who is facing political and economic turbulence over what prosecutors have labeled the biggest corruption scheme yet uncovered in Brazil, a sprawling system of kickbacks at state-run oil company Petrobras.
Neither Silva nor Rousseff have been implicated in the Petrobras scandal, which allegedly saw Odebrecht and several other major construction and engineering firms paying bribes to politically appointed executives at the oil company 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. Over 50 political figures, including 33 members of Congress, are being investigated in the Petrobras case.
Odebrecht strongly denied any wrongdoing in statements and emails.
The company said it has an "institutional relationship" with Silva as he's a former president, and acknowledges it invited Silva to travel abroad with company executives to speak at events meant to promote Brazilian firms.
The company also rejected the accusation that there were any ties between its relationship with the former president and any low-interest loans it has obtained from Brazil's state-run development bank, known by its Portuguese acronym BNDES, saying that just 7 percent of its revenues come from projects that used any of the bank's loans.
Paulo Okamotto, head of the Sao Paulo-based Lula Institute, said the former leader also rejects any wrongdoing, writing in a statement that Silva never acted in any consulting or lobbying role for Odebrecht or any other firm. Silva, while not directly responding to the accusations, blasted Epoca and other Brazilian media as "trash" in recent days.
The Eurasia Group political risk consulting firm wrote in a research note that "we see the investigation against Lula as meaningful" and that it could translate into even more serious trouble for the Rousseff government if corruption probes expand into other sectors of the economy or entangle BNDES.
However, Eurasia wrote that "we have a hard time viewing this recent twist as a real game-changer. The notion of 'influence peddling' is vague, particularly since Lula was a private citizen during the period in question."
Still, it said the "allegation he played a role in securing BNDES loans, which may not have followed due process, could prove more problematic for Lula and for the Rousseff administration."