* Testimony is by convicted bagman in vote-buying scheme
* Valerio made testimony seeking leniency in sentencing
* Lula calls Valerio's accusations lies
(Adds denial from Lula)
RIO DE JANEIRO, Dec 11 Former Brazilian
President Luiz Inacio Lula da Silva knew about and used funds
from a far-reaching vote-buying scheme to pay for personal
expenses, according to testimony by a convicted former
consultant to the ruling Workers' Party.
The testimony, reported on Tuesday by the Estado de S.Paulo
newspaper, was given in September to the Brazilian attorney
general's office by Marcos Valerio, an advertising executive
recently convicted as a bagman in the scheme.
Valerio also testified that an aide to the former president
made veiled threats when the scandal erupted in efforts to keep
him quiet, the newspaper said.
According to the report, Valerio gave the testimony
voluntarily in a bid to reduce his sentence after he and 24
other former Lula aides and associates were convicted in a
landmark trial heard by Brazil's Supreme Court.
Lula, on a visit to Paris with President Dilma Rousseff,
denied the accusations by Valerio when approached by reporters
upon leaving an event on Tuesday.
"I cannot believe in lies," he said without stopping to
Though Valerio still received a stiff 40-year prison
sentence, the circumstances of his testimony are likely to cast
doubt on his claims. Among other crimes, Valerio was convicted
of handling the money used in the scheme, which involved payoffs
to legislators in exchange for Congressional support.
The trial exposed crimes at the core of the administration
of Brazil's beloved former president and was hailed as a sign
that the country is growing less tolerant of the corruption long
rife in local, state, and national politics.
Lula, still Brazil's most influential political figure and a
possible contender for a new run at the presidency in 2014, has
denied any knowledge of the scheme since it came to light in
2005, roiling the first of his two terms.
Rousseff rejected the allegations as a "deplorable" attempt
to smear the image of her mentor and predecessor.
"I reject all these attempts - this isn't the first one - to
try to tarnish the immense respect that the Brazilian people
have for him," she said during a press conference with French
President Francois Hollande. "It's deplorable."
Though Lula's legacy has been dented by the corruption
scandal, the trial has done little to sap his star power - even
after officials including a former treasurer of the PT, as the
Workers' Party is known, and Jose Dirceu, his once-powerful
chief of staff, were convicted.
That could change if the allegations made by Valerio were
proven. Critics have long alleged that the scheme could not have
been carried out without Lula's knowledge, or tacit approval,
but so far no proof of either has surfaced.
'WE SHOULD KILL YOU'
The newspaper report said authorities already confirmed one
of two deposits that Valerio alleged were made into a bank
account controlled by a former Lula assistant. It also said that
another Lula assistant, and now the director of the former
president's foundation, at the time the scandal broke told
Valerio that "there are people in the PT who think that we
should kill you."
Lula's foundation declined to comment on the report. Marcelo
Leonardo, Valerio's lawyer, also declined to comment.
The former president, who presided over eight years of
sustained growth in Latin America's biggest country, left office
in 2011 because Brazil's constitution prohibits more than two
consecutive terms in the presidency. His approval ratings at the
time approached 90 percent.
After a bout with throat cancer, Lula returned to politics
this year and remains a friend and informal advisor to Rousseff,
a former bureaucrat and minister whom he hand picked to succeed
him as the party's candidate. Rousseff was unknown to most
voters at the time, but Lula's endorsement ensured her victory.
While Lula has said he will not run again if Rousseff
decides to stand for re-election, some analysts believe she
could decline. Rousseff's primary job as president thus far has
been rekindling growth in the world's sixth-largest economy,
which has slowed to a crawl for most of the past two years.
(Reporting by Paulo Prada in Rio, Ana Flor in Brasilia and
Gerard Bon in Paris; Editing by Todd Benson and Cynthia