UPDATE 3-Brazil searches Sembcorp Marine shipyard in graft probe; shares tumble

* Former president of Brazil shipyard under investigation

* Sembcorp Marine shares fall 8.4%

* Probe part of Brazil’s ‘Operation Car Wash’

* Comes as firm struggling with falling profits (Adds details, context throughout; updates share prices)

By John Geddie, Aradhana Aravindan and Gram Slattery

SINGAPORE/RIO DE JANEIRO, July 3 (Reuters) - Singaporean rig builder Sembcorp Marine said on Wednesday that authorities had searched its shipyard in Brazil as part of a graft investigation, sending its shares lower and underlining the staying power of Brazil’s ongoing “Car Wash” corruption probe.

Sembcorp Marine said the search was related to investigations against former consultant Guilherme Esteves de Jesus, adding that Martin Cheah Kok Choon, the former president of the Estaleiro Jurong Aracruz shipyard, was also under investigation.

In a separate statement, federal prosecutors in Brazil said they arrested Esteves de Jesus, noting there were “strong indications” he transferred $9 million to Choon as part of a wide-ranging scheme in which Sembcorp paid bribes to state-run oil firm Petroleo Brasileiro SA, or Petrobras, in turn for contracts.

Reuters was not immediately able to contact Esteves de Jesus or Choon for comment. An attorney listed as Esteves de Jesus’ lawyer did not answer a phone call from Reuters.

Sembcorp Marine said it was cooperating fully with federal police in Brazil and has provided “materials within the scope of the warrant.”

“In files obtained from Esteves’ electronic devices, there are references to dividing with Choon profits that originated from rig contracts signed” with Petrobras, prosecutors said, adding that Choon “benefited directly by receiving kickbacks.”

The probe comes as Sembcorp Marine is already struggling with falling profits due to a downturn in the global offshore and marine industry.

The search is part of Brazil’s wide-ranging Car Wash investigation, which was launched in 2014. As one of the largest corporate corruption probes in history, Car Wash has already taken down scores of politicians and businessmen in Brazil and across Latin America who were once thought untouchable.

Sembcorp Marine’s shares slid 8.44 percent in Singapore on Wednesday - their biggest daily drop in 1-1/2 years - while Sembcorp Industries fell 2.8% before paring some losses, to close down 2.43%. The broader market was down 0.09%.

Rival Keppel Offshore & Marine, a unit of conglomerate Keppel Corp, agreed in late 2017 to pay a $422 million fine to resolve charges it bribed Brazilian officials.

Sembcorp Industries, its biggest shareholder, last month provided Sembcorp Marine with a S$2 billion ($1.5 billion) loan to help it retire borrowings as well as for working capital and general corporate purposes.

Sembcorp Marine could also use some of that loan to pay off any potential fines, said Joel Ng, an analyst with KGI Securities. ($1 = 1.3559 Singapore dollars) (Reporting by John Geddie and Aradhana Aravindan; editing by Michael Perry, Subhranshu Sahu and G Crosse)