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World

Corruption Scandal Engulfs Brazil's State Oil Company

ROBERT SIEGEL, HOST:

A huge corruption scandal is engulfing Brazil's giant state oil company, and, by extension, the newly reelected government of President Dilma Rousseff. NPR's Lourdes Garcia-Navarro has the story from Sao Paulo.

LOURDES GARCIA-NAVARRO, BYLINE: So this is the way it allegedly worked. Construction companies would collude in inflating the cost of contracts of work for Petrobras. That extra money would then be funneled back to the state oil giant and siphoned off in bribes to executives and, crucially, members of the ruling party and other politicians.

The accusations have come from a detained former Petrobras director, and he alleges the corruption took place to the tune of millions of dollars from 2004 to today. Here's the thing, this is not only an embarrassment for President Dilma Rousseff, who was recently reelected with a mandate to get the lagging economy back on track here. She could be implicated even further. Before she became president of Brazil, she actually ran Petrobras during some of the time these alleged crimes took place. Leonardo Barreto is a political scientist at FSB Institute, a consulting firm in Brasilia.

LEONARDO BARRETO: (Foreign language spoken).

GARCIA-NAVARRO: He says, this is having a huge impact. President Dilma is going to need the next Congress to vote on fiscal issues, he says. The government itself is having problems of credibility. And there is an expectation that many of the parliamentarians will be involved in these scandals, so this is a new government that is weak from the get-go.

BARRETO: (Foreign language spoken).

GARCIA-NAVARRO: He adds, we don't know all the facts of the case yet, but Dilma Rousseff is very close to the political nucleus of this scandal. Over the weekend, federal police widened their investigation. Twenty-three people were questioned about the supposed money laundering, including the top executives of some of Brazil's biggest construction firms.

Corruption scandals in Brazil aren't new. In fact, this is a country where more than half of the Congress is already embroiled in some sort of criminal investigation. And a massive kickback scheme called the Mensalao, or big monthly payments, where members of the ruling PT party participated in a cash-for-votes scheme, erupted several years ago. The big question is whether any of these latest allegations will result in convictions.

The Mensalao case made a lot of noise, but ended in what critics said were light sentences. Brazil's former richest man, Eike Batista, is also on trial for insider trading after overseeing the biggest corporate default in Latin American history. And here is a statistic that puts things in perspective. No one in Brazil has been convicted for that crime ever. Lourdes Garcia-Navarro, NPR News, Sao Paulo. Transcript provided by NPR, Copyright NPR.