Oil report

UPDATE 4-Brazil police arrest former senator in Petrobras corruption probe

(Adds OAS comment)

BRASILIA, April 12 (Reuters) - Brazilian police arrested former senator Gim Argello on Tuesday, federal prosecutors said, as part of a two-year corruption investigation that has given momentum to impeachment proceedings against President Dilma Rousseff.

The probe centered on state-run oil producer Petroleo Brasileiro SA has uncovered systemic corruption at multiple companies and at the highest levels of government since the Workers’ Party took power in 2003. Rousseff herself is not being investigated.

The 28th round of police raids in the so-called “Operation Car Wash” probe was based on evidence that Argello, from the centrist PTB party, took bribes to ensure executives at major infrastructure companies would not be summoned by an investigative congressional committee in 2014, prosecutors said.

“These are alarming facts because they strongly suggest that a congressional investigative committee, which has an important role in our democracy, was used by a senator for corruption instead of fighting it,” prosecutor Athayde Ribeiro Costa said in the statement.

Prosecutors said construction firms UTC Engenharia SA and OAS SA paid Argello 5 million ($1.44 million) and 350,000 reais ($100,519), respectively. Executives at those firms were arrested at earlier stages of the probe.

Other builders are being investigated, according to the statement.

In an emailed response, an OAS spokeswoman said the company was providing all information requested by police and will continue to collaborate as needed. OAS requested bankruptcy protection last year.

A UTC representative said the company would not comment on ongoing investigations.

Tuesday’s police raids took place in the states of Sao Paulo and Rio de Janeiro and in the federal district. Potential crimes under investigation include corruption, money laundering and criminal association.

Dozens of executives from Brazil’s top construction and engineering firms have been charged with bribery and money laundering, and about 50 politicians are being investigated for receiving kickbacks off contracts with Petrobras.

The lower house of Brazil’s Congress is expected to hold a key vote on Rousseff’s impeachment on Sunday. If two-thirds of members vote in favor, the case will be sent to the Senate.

Caught in a political storm fueled in part by Brazil’s worst recession in decades, Rousseff has lost key coalition allies in Congress. A lower house committee on Monday voted 38-27 to recommend her impeachment.

It would be the first impeachment of a Brazilian president since 1992 when Fernando Collor de Mello faced massive protests seeking his ouster on corruption charges. ($1 = 3.4819 reais) (Reporting by Lisandra Paraguassu; Writing by Silvio Cascione; Editing by Jeffrey Benkoe)