CURITIBA, Brazil (Reuters) - Brazilian police on Tuesday arrested two executives involved in building a nuclear power plant for Eletrobras, pulling the state-run utility into a corruption scandal that has engulfed government-owned oil company Petrobras.
The arrests come as federal police follow allegations that a price-fixing, bribery and political kickback scheme they discovered at Petrobras extends to other state-led companies, including Eletrobras, Brazil's largest utility.
"Unfortunately, it looks like we will go into other sectors as well, and the energy sector alone is already huge," federal police agent Igor Romario de Paulo said in a press conference.
The broadening investigation could worsen an economic slowdown if more infrastructure projects are put on hold. Companies implicated so far have been barred from tenders with Petrobras, contributing to job losses and Brazil's descent into what is expected to be the worst recession in 25 years.
The "Operation Radioactivity," which police disclosed on Tuesday, focused on Eletrobras' Eletronuclear division, which is building a third nuclear-power reactor at Angra dos Reis, about 100 kilometers (62 miles) west of Rio de Janeiro.
Police detained Othon Luiz Pinheiro da Silva, who is on leave as Eletronuclear's chief executive officer. Federal prosecutor Athayde Ribeiro Costa said da Silva received 4.5 million reais ($1.2 million) in bribes from engineering firms Andrade Gutierrez and Engevix.
Ribeiro Costa also told journalists that police also had arrested Flavio Barra, Andrade Gutierrez's top energy executive, on Tuesday.
Andrade Gutierrez, Brazil's No. 2 engineering firm, said in a statement that it had always cooperated with investigators. Engevix said it was providing all the necessary clarifications to the courts.
Eletrobras, formally known as Centrais Eletricas Brasileiras SA, said it is seeking more information about the case to "defend its interests and those of its investors".
The company said it is still waiting for conclusions from an internal investigation it opened earlier this year.
Barra is among the engineering executives who have been arrested as part of the probe linked to Petrobras, formally known as Petroleo Brasileiro SA. More than two dozen lawmakers, mostly from President Dilma Rousseff's ruling coalition, also have been implicated.
Ribeiro Costa said police also were investigating the other members of a consortium hired by Eletronuclear in September to finish work on the reactor.
Executives of many companies in the consortium have been accused in other parts of the probe.
Besides the arrests, Operation Radioactivity included 23 search and seizure warrants in Brazil's largest cities, according to a federal police statement.
The detainees will be taken to the southern city of Curitiba, where the federal judge leading the case is based.
Allegations of bribery could add to problems for the Angra 3 plant, the third reactor under construction at the country's only nuclear power facility.
Angra 3 was shelved in 1986 as Brazil entered a debt and inflation crisis that stalled infrastructure spending, but Luiz Inacio Lula da Silva's government revived the project in the early 2000s. It has faced repeated delays and cost overruns.
The budget for the most recent phase of Angra 3 has risen to 14 billion reais from 7.2 billion reais in 2008, according to Eletronuclear.
Energy Minister Eduardo Braga said in May that it would be the country's last nuclear power station built as a public works project, as the government looks to private investors to backstop an overburdened electricity system based on hydropower.
French nuclear energy company Areva, which signed a 1.25-billion-euro contract to supply engineering services and components in 2013, said last month it had reduced work on Angra 3 because of financing delays.
"Corruption is endemic," said prosecutor Ribeiro Costa, "and we are in the process of metastasis."
Additional reporting by Caroline Stauffer, Jeb Blount and Cesar Bianconi; Writing by Caroline Stauffer and Jeb Blount; Editing by Lisa Von Ahn, Paul Simao and David Gregorio