February 4, 2015 / 12:38 AM / 3 years ago

Brazil's Rousseff replacing Petrobras CEO - source

Petrobras Chief Executive Maria das Gracas Silva Foster is seen arriving at the Brasilia international airport after meeting with President Dilma Rousseff February 3, 2015. REUTERS/Ueslei Marcelino

BRASILIA (Reuters) - Brazilian President Dilma Rousseff will replace the chief executive and other senior managers at state-run oil company Petrobras this month in an effort to turn the page on a widening corruption scandal, a government source said on Tuesday.

Petrobras shares jumped more than 15 percent, their biggest one-day gain in 16 years, after a newspaper first reported that Rousseff intended to replace Petrobras CEO Maria das Graças Foster.

Presidential spokesman Thomas Traumann denied the report and later said after a meeting between Rousseff and Foster at the presidential palace that they had reached no conclusion about Foster’s possible departure.

But the government source with knowledge of the matter said Rousseff had accepted Foster’s offer to resign and would seek a replacement with experience in the oil industry. New senior management will come from within the company and elsewhere in the private sector, the source told Reuters on condition of anonymity.

Petroleo Brasileiro SA, as Petrobras is formally known, declined to comment.

Investors bet on Tuesday that new leadership will help restore credibility to the scandal-tainted firm and ramp up production and boost profits, traders said.

Petrobras preferred shares, its most-traded class, jumped 15.5 percent in Sao Paulo to close at 10 reais.

It was the largest one-day jump since Jan. 15, 1999, also helped by a sharp rise in oil prices.

KICKBACK SCHEME

Pressure has been mounting on Rousseff to clean up Petrobras, whose reputation suffered with the arrest and testimony of three former senior executives and three dozen others, including executives of major suppliers.

Police say they have uncovered a price-fixing, bribery and political kickback scheme that allegedly benefited Rousseff’s ruling Workers’ Party as well as others.

The illegal activity, authorities allege, diverted at least $3.7 billion and perhaps more than $28 billion from Petrobras coffers.

Petrobras said last week that the corruption was one of several factors that helped wipe out a net 61.4 billion reais ($22.7 billion) from the value of its assets, such as refineries and oil platforms, but it refused to take a charge against earnings.

Rousseff has asked Finance Minister Joaquim Levy, a University of Chicago economist, to help Petrobras sort out the best accounting methods for handling its thorny balance sheet, two government sources told Reuters on condition of anonymity.

Levy, who stepped down as head of asset management at Banco Bradesco to join the government last month, is also helping to find new names for Petrobras’ board of directors, according to the first government source.

Re-elected in October, Rousseff had stood firmly behind Foster, a longtime associate and close friend.

A Petrobras employee since the 1970s, Foster moved up company ranks rapidly during Rousseff’s 2003-2010 tenure as chairwoman of Petrobras’ board of directors.

Foster has said publicly that she offered to resign when the corruption scandal broke, but she maintains she did nothing wrong.

Rousseff has also denied any knowledge of graft when she was chairwoman of the board of directors, a period in which much of the alleged corruption took place.

Opposition politicians say they believe her and that she is unlikely to face impeachment.

($1 = 2.70 realis)

Additional reporting by Jeb Blount in Rio de Janeiro, Anthony Boadle and Jeferson Ribeiro in Brasilia; Editing by Kieran Murray

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