October 1, 2018 / 10:47 PM / 18 days ago

Brazil judge releases damaging Workers Party testimony days before vote

BRASILIA (Reuters) - A judge released fresh testimony on Monday alleging corrupt practices involving members of Brazil’s leftist Workers Party (PT), whose candidate Fernando Haddad faces far-right lawmaker Jair Bolsonaro in this month’s presidential election.

FILE PHOTO: Antonio Palocci (L), former finance minister and presidential chief of staff in recent Workers Party (PT) governments, is escorted by federal police officers as he leaves the Institute of Forensic Science in Curitiba, Brazil, September 26, 2016. REUTERS/Rodolfo Buhrer/File Photo

Anti-corruption judge Sergio Moro unsealed the plea-bargain testimony of jailed former Finance Minister Antonio Palocci stating that PT founder and then-President Luiz Inacio Lula da Silva ordered the collection of bribe money in 2010 to fund the campaign of his successor Dilma Rousseff.

Lawyers for Lula, who was jailed in April and barred from running for office due to a corruption conviction, said publication of the testimony was politically motivated to harm Lula and his party.

Brazilians will vote on Sunday in the most polarized election in a generation and the Workers Party could return to office despite corruption cases against its leaders and allies. The Palocci testimony could increase anti-Workers Party sentiment, which has helped make Bolsonaro the frontrunner in the race.

Haddad has surged in voter support to six points behind Bolsonaro since he was confirmed as Lula’s replacement, according to opinion polls. The polls indicate the Workers Party candidate could win a likely second round runoff vote on Oct. 28.

Palocci resigned as Rousseff’s chief of staff in 2011 after only five months due a corruption accusation. In the testimony make public on Monday, he said he attended a meeting in 2010 where Lula ordered the then chief executive of state-run oil company Petroleo Brasileiro SA, José Sérgio Gabrielli, to commission 40 drill ships and use bribe money from the contracts to fund Rousseff’s campaign.

Palocci was arrested two years ago in the sweeping Car Wash investigation into the use of the contracts at Petrobras, as the state oil company is known, by the Workers Party and allied parties to siphon off funds for their political needs.

The court documents made public on Monday also cite alleged corrupt practices by Petrobras executives and one financial institution related to exploration blocks in Africa, where the company partnered with investment bank Banco BTG Pactual SA in a venture known as PetroAfrica.

BTG acquired a stake in the venture in 2013 and was trying to sell it until recently.

BTG’s most widely traded class of stock fell 3.4 percent on Monday, to 20.57 reais, after excerpts of Palocci’s plea deal were released.

The bank did not immediately respond to requests for comment. Gabrielli could not be immediately reached for comment.

Reporting by Ricardo Brito; Additional reporting by Tatiana Bautzer; Writing by Anthony Boadle; Editing by Tom Brown

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