Lula suspends Brazil spy chiefs over phone taps

BRASILIA (Reuters) - President Luiz Inacio Lula da Silva suspended the entire leadership of Brazil's intelligence agency on Monday after it was accused of spying on the Supreme Court chief and members of Congress.

The presidential office said in a statement that Lula had decided to suspend the top officials until an investigation into the allegations was complete.

Opposition leaders had earlier demanded an inquiry into a magazine report about the spying, the latest scandal to hit Lula's government.

The scandal is unlikely to dent Lula's strong approval ratings buoyed by a booming economy, and his government said the alleged spying was "abominable," but it could sour his relations with Congress and the judiciary.

Veja, the country's leading news magazine, reported on the weekend that the Brazilian Intelligence Agency, or Abin, spied on Supreme Court President Gilmar Mendes and tapped his telephones. It published what it said was a transcript of a private telephone conversation Mendes had with a member of Congress.

An Abin agent who provided the transcript said such illegal phone tapping of authorities was common and also included the head of the Senate and two cabinet members, Veja reported.

Lula held urgent talks for most of Monday with Mendes, the Senate speaker and several Congress members who expressed their concern and demanded those responsible to be punished.

"Somebody has to be sacked. If the justice minister is at fault, let it be him then," said Demostenes Torres, of the opposition DEM party.

Lula was surprised and outraged at the possibility of the Supreme Court chief being secretly recorded, his spokesman Marcelo Baumbach told reporters earlier.

Abin said it was investigating the accusations but had confidence in its staff.

Other government officials joined the opposition in condemning the alleged spying as an attack on democracy and a throwback to the days of Brazil's military dictatorship when intelligence services uncovered dissidents, some of whom were tortured or killed.

LACK OF CONTROLS

"I think these phone tappings are abominable," said Vice President Jose Alencar.

Critics say Abin, which reports to Lula's institutional security adviser, lacks transparency and external controls.

"There is complete lack of control in the state apparatus," Mendes told reporters.

Most of the legislators suspected of being spied on are in opposition parties, and Mendes is presiding over a high-profile case involving a prominent banker, politicians and businessmen.

"The rule of law has been broken, the credibility of our democratic institutions has been damaged," said Sen. Jose Agripino of the DEM party.

The party will call the minister of justice and other authorities to testify in Congress, Agripino said.

Since former union leader Lula took office in 2003, several of his cabinet members, including his finance minister and chief of staff, have resigned over corruption scandals.

Lula himself came close to facing an impeachment process in 2005 after his ruling Workers' Party admitted having illegally financed election campaigns of legislators.

Even though it requires a judicial authorization, tapping phones is common in Brazil and media regularly leak private conversations of politicians and businessmen.

Congress had already launched an inquiry into the matter before the latest scandal broke.

(Editing by Stuart Grudgings and Mohammad Zargham)