By Reed Johnson and Luciana Magalhaes
SÃO PAULO -- Brazil's interim President Michel Temer denounced
as "irresponsible lies" allegations that he helped broker illegal
campaign contributions as part of a bribes-for-contracts scheme
centered on state oil company Petróleo Brasileiro SA, even as a
third cabinet minister resigned over similar charges.
In a brief Thursday morning TV address, Mr. Temer denied the
claims made in plea-bargain testimony by Sergio Machado, former
head of Petrobras Transporte SA, or Transpetro, a
fuel-transportation and logistics subsidiary.
Mr. Machado has testified that in 2012 he organized, at Mr.
Temer's request, a donation of 1.5 million reais (about $432,000)
from a construction firm to Mr. Temer's political party, in
exchange for Transpetro contracts. Mr. Temer dismissed the
accusations as "frivolousness."
But the sweeping charges laid out by Mr. Machado may not be
quickly or easily dispelled. They implicate some two-dozen
politicians from seven different political parties as part of the
epic probe dubbed Operation Car Wash, -- including Mr. Temer's
tourism minister, Henrique Eduardo Alves, who resigned on Thursday
after Mr. Machado's testimony alleged he had taken bribes.
Mr Alves is the third cabinet minister in a month to resign over
graft allegations. All three have denied wrongdoing.
Mr. Machado's testimony amounts to a kind of user's manual for
political malfeasance, painting a stunningly comprehensive picture
of a well-organized national bribery machine, in which
business-supported, illegal campaign financing appears woven into
the fabric of governance, with Mr. Temer allegedly serving as a
principal arbiter.
Paulo Sotero, director of the Brazil Institute at the Wilson
Center in Washington, said the new allegations present "an X-ray"
of the symbiotic corruption between Brazil's political and business
establishments.
"What we are seeing is a systemic crisis," he said. "This
political system isn't functional anymore. And the economic system,
with this traditional, historically heavy presence of the state
everywhere, was the vehicle used by the politicians to obtain those
funds."
Still, Mr. Sotero predicted Mr. Temer would be able to hold his
governing mandate together, at least for the time being, as
impeachment proceedings move forward against suspended President
Dilma Rousseff.
Other analysts differed on whether the new accusations are
likely to make it more difficult for Mr. Temer's barely month-old
administration -- which got an 11.3% approval rating in a recent
poll -- to pull Brazil's economy out recession and restore order to
its bitterly divided political system.
Mr. Temer was elevated from vice-president to president in May
when Ms. Rousseff was forced to step aside to face a Senate
impeachment trial on charges that she hid a growing budget deficit,
which she denies. He will serve out her term, which runs through
2018, if she is ousted.
Mr. Temer has pledged to restore stability and credibility to
Brazil's governing class. But a cloud already has begun to form
around his administration and his centrist Brazilian Democratic
Movement Party, or PMDB.
Earlier this week, a congressional ethics panel voted to oust
suspended House Speaker Eduardo Cunha from the Chamber of Deputies,
on grounds that he lied about stashing money in overseas accounts.
Mr. Cunha has denied any wrongdoing.
Even by the standards of Brazil's biggest-ever corruption
scandal, Mr. Machado's allegations are exceptional in scope and
detail.
In his plea bargain, made public late Wednesday, Mr. Machado
described in explicit terms a highly organized system of bribery
operating within his unit of Petrobras. He said company contractors
paid regular kickbacks according to a fixed fee schedule ranging
from 3% of federal contracts to as much as 30% for municipal public
works.
"Petrobras is the most honest madame in the cabarets of Brazil,"
Mr. Machado wryly observed, according to the document.
Mr. Machado testified that the "slush fund" operated for decades
and was accepted by suppliers as the "political cost" of winning
contracts at Petrobras, Brazil's largest and most important state
company. Suppliers simply inflated the cost of their contracts to
pay bribes, some of which flowed like monthly allowances to
political chieftains to finance campaigns and cement alliances
among Brazil's 35 political parties.
As the head of Transpetro from 2003 to 2014, Mr. Machado said,
he oversaw the distribution of 115 million reais ($33 million) in
illicit funds. He said he funneled more than 100 million reias of
that 11-year total to Mr. Temer's PMDB, Brazil's largest political
party, whose backing is critical for passing legislation in
Congress.
In addition to the funds allegedly paid to Mr. Temer, Mr.
Machado said millions in payments went to other PMDB elites
including Senate President Renan Calheiros, Senator Romero Jucá and
former Brazilian President José Sarney. The testimony also
implicates former presidential candidate Aécio Neves of the
center-right Brazilian Social Democracy Party, or PSDB.
All men have denied wrongdoing. On Wednesday Mr. Calheiros said
Mr. Machado would sell out "his own mother" to save his skin.
Legal experts are split on whether Mr. Temer himself could be
charged for his reputed actions. Brazilian law says a president
can't be indicted for any crime that occurred prior to his or her
mandate. The events asserted by Mr. Machado happened in 2012 when
Mr. Temer was still vice president.
However, Mr. Temer's nebulous status as Brazil's "acting"
president opens the door to interpretation, according to Rio de
Janeiro law professor Ivar Hartmann.
Even if the allegations against Mr. Temer aren't proven, further
political instability could hamper his efforts to pass important
economic measures to jump-start Brazil's listless economy, said
Ricardo Ismael, a political science professor at Pontifical
Catholic University of Rio de Janeiro.
"If Mr. Temer ends up being investigated, it will likely be the
end of his government. We will see calls for a new election grow,"
Mr. Ismael said.
--Marla Dickerson contributed to this report.
Write to Reed Johnson at reed.johnson@wsj.com and Luciana
Magalhaes at luciana.magalhaes@wsj.com
(END) Dow Jones Newswires
June 16, 2016 19:19 ET (23:19 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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