March 27, 2015 / 5:08 PM / 4 years ago

Brazil police arrest Grupo Galvão CEO in Petrobras probe

SAO PAULO (Reuters) - Brazilian police on Friday arrested the CEO of Grupo Galvão, the latest executive seized in a corruption probe focused on state-run oil firm Petroleo Brasileiro SA.

A woman waves a flag with Petrobras' logo as she takes part in a demonstration in defense of Brazil's President Dilma Rousseff and the state-run oil company Petrobras, in Rio de Janeiro March 13, 2015. REUTERS/Ricardo Moraes

Dario Galvão, chief executive of the construction group, and Guilherme Esteves, a lobbyist who is being investigated for funneling bribe money, were taken to federal police headquarters in the southern city of Curitiba, a court spokeswoman said.

Trials are underway in Curitiba, in what has become Brazil’s biggest-ever corruption probe known as Operation Car Wash.

In December, prosecutors accused the CEO of participating in a cartel of construction executives that fixed prices on contracts at Petrobras, as the oil company is known.

Federal Judge Sergio Moro called Galvão the mastermind of the company’s criminal activity and said he posed a risk of committing more crimes. Prosecutors have proof of his crimes from 2008 until 2014, Moro wrote in a court decision.

In a statement, Grupo Galvao said Galvao’s arrest was “without legal grounding” and he had “not committed any crime.” It also said that Galvao Engenharia, its building subsidiary which filed for bankruptcy this week, rejects vehemently any accusations of being part of a corrupt cartel.

Moro also cited evidence that Esteves used secret accounts abroad to funnel large bribes to employees at Petrobras and rig producer SeteBrasil.

Two dozen of Brazil’s biggest engineering firms are being investigated for overcharging on Petrobras contracts and using the excess to bribe executives, politicians and political parties.

Esteves was not available for comment.

Galvão Engenharia was also one of 23 companies blacklisted by Petrobras in December, with the oil company cutting off payments and banning the firms from bidding on future contracts.

Nearly 100 people, including the treasurer of President Dilma Rousseff’s Workers’ Party, have been indicted in the year-old probe, and prosecutors say more criminal charges will be presented. About 20 executives and money changers are in state and federal jails in Curitiba, including the head of Galvão Engenharia, Erton Fonseca.

Eduardo Leite, vice president of another firm accused of belonging to the cartel, Camargo Correa, was transferred to house arrest this week after agreeing to a plea bargain deal to cooperate with investigators. Another executive from the firm would be released soon, the court spokeswoman said.

Reporting by Caroline Stauffer; editing by David Gregorio and Richard Chang

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