World View Hot Topics in Pivotal Markets
Aide Corruption Case Prompts Brazil to Ask What Lula Knew
Could one of the most powerful figures in Brazil’s ruling Workers' Party go to jail?
Jose Dirceu, chief of staff to former president Luiz Inacio Lula da Silva, is often called the godfather of the party. Now he is one of the accused in a notorious corruption case that after seven years has finally reached the Supreme Court, which has exclusive jurisdiction to try high officials. The trial is being seen as a watershed in the development of Brazil's democracy and an acid test for its judiciary.
“It's common to hear that because of corruption there is no accountability in Brazil. But now we are in an important moment, a moment in Brazilian history, a moment in the building of democracy and institutions," said former President Fernando Henrique Cardoso in a video on the Observador Politico website his foundation funds. The trial, he said, “could mark history.”
As a senior opposition figure, Cardoso arguably has an axe to grind. Still, his view was typical. Outspoken Superior Court Judge Eliana Calmon said that it was not just the accused but the Supreme Court itself that was on trial. “This is when the Supreme Court will be judged by public opinion,” she said.
According to the official charges in the so-called mensalao (big monthly payment) affair, at least 55 million reais ($30 million) disguised as loans was transferred to a group of companies associated with the advertising executive Marcos Valerio. The money allegedly was used to pay Workers' Party debts, buy political support from allied parties in Congress and enrich some of those involved. Some of the money came from state-owned entities, prosecutors say. The O Globo newspaper calculates that almost twice as much money was involved. All 38 defendants deny the accusations.
Last week, Attorney General Roberto Gurgel called the affair “the most daring and outrageous corruption scheme and embezzlement of public funds ever seen in Brazil.” The stain of it nearly brought down Lula’s first government. The charismatic former union leader had been elected as a "clean slate" candidate, and many of those who'd voted for him never forgave him for the scandal. Lula denies the scheme existed.
According to prosecutors, Marcos Valerio administered the scheme, and party treasurer Delubio Soares told Valerio who was to get paid. Executives from Brazil’s Banco Rural are charged with helping move money to Valerio’s company.
Charged with corruption and conspiracy, Dirceu is accused of being the chief of the operation and is the big fish prosecutors want. He resigned as chief of staff in 2005 amid the storm of the scandal and was stripped of his seat in the Chamber of Deputies by his fellow members.
Apart from that, Dirceu has outstanding Workers' Party credentials. Imprisoned during Brazil’s military dictatorship, he was freed in a prisoner swap after the resistance kidnapped the U.S. ambassador. Exiled to Cuba, he had plastic surgery and eventually returned to Brazil, where he lived for years under a false identity and even married. He was one of the founders of the party in 1980 and remains a powerful force within it.
“This is the first time the highest court in the country has an originating case of these proportions,” Renato Silveira, a law professor at the University of Sao Paulo, told Valor, a business daily. He was optimistic, adding, "It seems to me there is a difficulty in applying the laws and a tolerance of corruption, which fortunately is changing." As many have noted, the Supreme Court in 1994 acquitted Fernando Collor de Mello, president from 1990 to 1992, after he was impeached for trafficking influence.
President Dilma Rousseff has won praise -- not least from U.S. Secretary of State Hillary Clinton -- for being tough on corruption. Six of her ministers left office in 2011 in the wake of a series of scandals. Still, no one has been prosecuted. Politicians, even corrupt ones, have very rarely gone to jail in Brazil.
In February, the Supreme Court upheld a 2010 law barring individuals from standing for election who've been judged guilty of wrongdoing by an official body. The law will apply for the first time in municipal elections scheduled for October.
Now Brazilians are waiting to see if attitudes have changed enough for someone like Dirceu to actually end up in prison.
Political scientist Claudio Goncalves Couto wrote in his column for Valor that some Brazilians think that “if the Supreme Court is not hard on the accused, it will contribute to the loss of credibility of our republican institutions.” But if the Court condemns the accused in a bow to public pressure, Couto wondered, what does that do for its credibility? The court may be damned if it does, and damned if it doesn’t.
Whatever the court decides on Dirceu, it can't answer the other big question Brazilians are pondering: What did Lula know? The journalist Miranda Sa wrote in her blog, “In everybody’s mind is indignation toward Lula. After all, did he know or did he not know what was happening in the room next to his?” Lula says the very idea of the mensalao is bogus.
In his column for the virulently anti-government news weekly Veja, columnist Ricardo Setti helpfully published the video of Lula apologizing to the nation after the scandal broke in 2005. “I feel betrayed. Betrayed by unacceptable practices that I never knew about,” Lula said. “We have to apologize. The party has to apologize. The government where it went wrong has to apologize.”
As Sa and Setti pointed out, if the illicit payments never took place, Brazilians have to wonder, what was Lula so sorry about?
(Dom Phillips is the Rio de Janeiro correspondent for World View. The opinions expressed are his own.)
To read more from World View, Bloomberg View's emerging markets blog, click here.
To contact the writer of this blog post: Dom Phillips at firstname.lastname@example.org.
Bloomberg moderates all comments. Comments that are abusive or off-topic will not be posted to the site. Excessively long comments may be moderated as well. Bloomberg cannot facilitate requests to remove comments or explain individual moderation decisions.