PBR Petroleo Brasileiro ADR

By Jeffrey T. Lewis 

SÃO PAULO -- The fledgling administration of Brazil's acting President Michel Temer was rocked by corruption allegations following the release of plea-bargain testimony on Wednesday implicating him in a sprawling graft scandal centered on the country's state oil company.

Mr. Temer, who replaced Dilma Rousseff in May when she stepped down to face an impeachment trial, allegedly asked the head of the transportation unit of state oil company Petróleo Brasileiro SA to arrange campaign contributions to Mr. Temer's party in 2012, according to a plea-bargain agreement released Wednesday by Brazil's Supreme Court.

The head of the unit, Sergio Machado, said he organized a donation of 1.5 million reais ($433,900) from one of his company's suppliers to Mr. Temer's party, in exchange for giving the supplier a leg up on winning contracts with Petrobras Transporte SA, according to the plea bargain testimony.

Mr. Temer, who was Brazil's vice president at the time, told Mr. Machado he was worried that his party's candidate for mayor of São Paulo needed more financing, Mr. Machado said in the document.

Representatives of Mr. Temer couldn't immediately be reached for comment, but he has denied the allegation in the past. Petrobras, as the oil company is known, had no immediate comment.

Mr. Machado sought out prosecutors in the Petrobras corruption investigation, known as Operation Car Wash, and offered to negotiate a plea agreement after other people accused in the case said he participated in the bid-rigging-and-bribery scheme at Petrobras, according to a spokeswoman for the probe.

Wednesday's developments are the latest corruption allegations to tarnish the administration of Mr. Temer, who has been Brazil's acting president for barely a month.

Two of his cabinet members -- including the former minister of transparency -- resigned from their posts last month in response to allegations that they were working to subvert the investigation into the massive graft scandal at the state oil company. Other senior members of his Brazilian Democratic Movement Party, including Senate President Renan Calheiros, are under investigation in that probe.

"This news is another hit to Michel Temer and affects his popularity, which is already low," said Carlos Melo, a political science professor at São Paulo business school Insper. "But it's not a surprise for public opinion because everyone knows Temer has been in politics for a long time."

Luciana Magalhaes and Rogerio Jelmayer contributed to this article.

(END) Dow Jones Newswires

June 15, 2016 16:41 ET (20:41 GMT)

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