Stumbling blocks emerge for Brazil prosecutors in Petrobras case

Mon May 4, 2015 9:00pm EDT
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By Caroline Stauffer

SAO PAULO (Reuters) - Recent setbacks for prosecutors in a huge corruption scheme at Brazil's state-run oil company Petroleo Brasileiro SA suggest they will struggle to win as many convictions as they seek.

The Supreme Court's decision last week to release from jail nine executives at construction companies suspected of paying bribes in the scheme, and put them under house arrest instead, reduces the chances of prosecutors convincing them to strike plea bargain deals that could result in additional charges.

The ruling, and a separate decision by the court to halt some new depositions, suggest defense efforts to poke holes in the investigation, often by citing procedural issues, are starting to bear fruit.

To be sure, legal experts do expect more convictions in the case in which former executives at Petrobras, as the company is known, and some of its suppliers are accused of inflating the value of service contracts and funneling the excess funds into their own bank accounts and to political parties, including that of President Dilma Rousseff. (Graphic on the alleged corruption scheme:

Rousseff is not being investigated, but her ratings have suffered because of her party's ties to the scandal and fears that economic fallout from the investigation will tip Brazil into recession this year.

Prosecutors say bank records and witness testimony show at least 2.1 billion reais ($700 million) was embezzled. The probe has already led to 97 indictments, including four former Petrobras executives, the senior engineering executives, and the treasurer of Rousseff's Workers' Party.

Dozens of elected officials have also been implicated in a separate investigation in Brasilia.

The first eight convictions came on April 22, including a former Petrobras executive and a black-market money dealer, who were sentenced to a year of house arrest and three years in jail, respectively.   Continued...

The Petrobras logo is seen in a refinery in Cubatao near Sao Paulo in this February 24, 2015 file photo. REUTERS/Paulo Whitaker/File