Brazil Probe of Rousseff Official Shelved on Lack of Evidence

A probe into $12 million earned last year by Brazilian Cabinet Chief Antonio Palocci for consulting work while he managed President Dilma Roussef’s election campaign was shelved on lack of evidence, the nation’s chief prosecutor said.

Opposition lawmakers asked Prosecutor Roberto Gurgel to investigate Rousseff’s top aide after Folha de S. Paulo newspaper reported he made 20 million reais ($12 million) last year providing advice to companies -- half of it after Rousseff was elected and Palocci was managing her transition team. In 2006, when Palocci was elected to Congress, he reported assets worth 375,000 reais.

The prosecutor’s office, in a ruling sent by e-mail yesterday, said any inconsistency in Palocci’s wealth and declared income is not in itself a crime though could constitute an administrative “impropriety.”

Yields on Brazilian interest-rate futures contracts rose on concern Palocci, a former finance minister, may leave the government, weakening Rousseff’s plan to curb inflation. The yield on the contract due in January 2012 rose three basis points to 12.37 percent yesterday.

“He’s a very important piece in the economic team, so if he leaves, it would be a big loss for the government,” Mauricio Junqueira, who helps manage $300 million at Squanto Investimentos, said in a telephone interview from Sao Paulo yesterday.

Strengthened Position

Yesterday’s ruling strengthens Palocci’s position in the government and may prompt lawmakers to end a campaign to start a separate congressional probe, said a government official who could not be named because the official is not authorized to speak publicly on the matter. A separate civil probe by prosecutors in the federal district of Brasilia is still going forward.

Palocci, in an e-mailed statement sent after the ruling was issued, said he felt vindicated by the federal prosecutor’s decision.

“I hope this decision restores reason, balance and justice to what is a clash of politics,” Palocci said.

Palocci has been under scrutiny for a surge in his personal wealth after the Folha de S. Paulo report on May 15 that he paid 6.6 million reais for a Sao Paulo apartment last year. On May 20, Folha reported he earned 20 million reais from his consulting business.

‘Not a Cent’

In a June 3 interview on TV Globo, he said “not a single cent” of his earnings last year was related to work on Rousseff’s campaign. All of his income had been reported to tax authorities and his consulting work ended when he was named cabinet chief, he said. Palocci said he cannot name the 20 to 25 banks, investment funds and other companies he provided consulting services to because the contracts are confidential.

Palocci, who served as President Luiz Inacio Lula da Silva’s finance minister from 2003 to 2006, has battled accusations of corruption.

He resigned as finance minister in March 2006 after lawmakers accused him of illegally obtaining and leaking the private banking records of a witness in a bribery investigation that targeted senior officials of Lula’s Workers’ Party.

The witness, a caretaker, placed Palocci at a Brasilia residence where politicians and lobbyists allegedly negotiated bribes and partied with prostitutes.

Palocci denied any wrongdoing. The Supreme Court cleared him of breaking bank secrecy laws in 2009.

To contact the reporter on this story: Arnaldo Galvao in Brasilia Newsroom at agalvao1@bloomberg.net Matthew Bristow in Brasilia at mbristow5@bloomberg.net

To contact the editor responsible for this story: Joshua Goodman at jgoodman19@bloomberg.net

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