Brazil labor minister latest to feel scandal heat

Mon Nov 7, 2011 2:18pm EST

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* Labor minister denies allegations, says won't quit

* Allegations follow pattern of suspect NGO ties

By Stuart Grudgings

RIO DE JANEIRO, Nov 7 (Reuters) - Brazil's labor minister came under pressure to quit on Monday after media allegations of corruption put him at risk of becoming the seventh member of President Dilma Rousseff's Cabinet to fall this year.

Carlos Lupi became the latest minister in the firing line on Saturday when weekly magazine Veja, citing unidentified lawmakers and officials, reported that advisers to the minister had demanded kickbacks on government contracts with nongovernmental groups.

Lupi immediately fired one of the advisers and denied any personal wrongdoing, but he faced further allegations against his ministry in newspapers on Monday and a senator in his own party said the accusations were "grave."

O Globo reported that the national auditing court had warned in October of a "critical situation" at the Labor Ministry with more than 500 unaudited accounts with NGOs that had received public money. On Sunday, the same newspaper reported that federal police in the state of Sergipe were investigating suspected fraud worth 11 million reais ($6.3 million) involving contracts between non-profit groups and the ministry.

Relations between NGOs -- non-profit groups that perform a range of activities such as worker training -- have been at the center of at least two of the corruption scandals that have unseated five ministers this year. A sixth minister quit after making disparaging remarks about his colleagues.

The resignations have yet to harm Rousseff, who has benefited from the perception she is supporting the purge, but analysts say she may start to lose public support if the government appears unable to stanch the resignations.

ASKS FOR FEDERAL POLICE INQUIRY

Lupi denied the allegations in an interview with O Globo published on Monday and said he would "die rather than throw in the towel." He said he had asked the justice minister to open a federal police inquiry into the allegations in Veja.

"No one can have their honor thrown in the garbage by an anonymous denunciation. ... I am not involved in any wrongdoing," he was quoted as saying.

Several of this year's scandals have followed a similar pattern -- initial denials by ministers followed by a steady drip of fresh allegations in the media and the eventual withdrawal of support by Rousseff.

The last one to quit, Sports Minister Orlando Silva, vehemently denied allegations he received kickbacks from public contracts but ended up resigning in October two weeks after the first allegations were reported.

Lupi, who was appointed by Rousseff's popular predecessor, Luiz Inacio Lula da Silva, is a member of the center-left PDT party that is part of Rousseff's fractious 16-party coalition.

The party planned to hold a meeting on Tuesday to hear Lupi's explanations and was considering asking the federal public prosecutor to open an investigation, a spokesman for PDT Senator Pedro Taques told Reuters.

"The facts are serious and society deserves an answer," Taques said on his Twitter page.

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