• Sergio Moro tells associates his role is winding down
  • He is running into legal and political limits to his mandate

The crusading federal judge behind Brazil’s explosive corruption investigation, facing the limits of his mandate and signs of political pushback, sees his role in the case winding down by the end of the year, a turning point in a probe that has helped push the president to the brink of impeachment.

For more than two years, Judge Sergio Moro and his team of prosecutors and police in the southern town of Curitiba have tracked the $1.8-billion graft scandal across four continents. They uncovered a crime ring so epic that it shattered Brazil’s political and economic leadership and helped tip the nation into its worst recession in a century.

Sergio Moro
Sergio Moro
Photographer: Patricia Monteiro/Bloomberg

Now, legal challenges are chipping away at Moro’s jurisdiction over executives amid criticism that he’s over-reaching. Brazilian law also bars him from going after sitting politicians accused of graft. So he expects significantly fewer new operations under his watch starting next year, according to three top officials who asked not to be named relaying details from private conversations. The press-shy judge declined to comment.

That doesn’t mean corruption investigations will end but it probably means a substantial drop in their intensity and speed. The Supreme Court has sole jurisdiction over lawmakers. Its exhaustive caseload, political ties and past aversion to prosecuting legislators are the foundation for a long-held belief that crooked leaders are all but untouchable in Brazil. While that’s beginning to change, there’s no doubt that the top court -- responsible for ruling on everything from impeachment challenges to state debt relief -- won’t be as steadfast in its pursuit of corruption as the dogged 43-year-old judge with jet black hair.

“Moro is a judge with a single focus -- extremely capable, very disciplined and efficient,” said Floriano Azevedo Marques, a professor of law at Sao Paulo University. “That’s why he’s been so fast.”

Publicly, the Federal Police and prosecutors say the investigation known as Carwash will go on come hell, high water, or impeachment. Inside legal circles, however, there’s a sense that when Moro wraps up his investigation into the state-run oil giant Petrobras -- the key case under his purview and the epicenter of Carwash -- it will mark a major slowdown. 

In Brazil’s justice system, a judge is responsible for overseeing Federal Police probes, approving accusations by prosecutors, reviewing the evidence and deciding if a defendant is guilty or innocent. Other elements of the scandal thrown off by Carwash are already being sent to other federal judges.

Ground Zero

Curitiba, about an hour’s flight from the financial hub of Sao Paulo, is called Brazil’s green capital, but these days it’s better known as ground zero for the sprawling corruption scandal. It’s here that police investigators, working in a modern glass-and-concrete building, first connected an infamous money launderer to a Petrobras executive. From there, they pieced together an elaborate bribery scheme involving the nation’s biggest builders, lucrative public works projects and top politicians, tracing alleged million-dollar kickbacks to campaign coffers and Swiss bank accounts.

While President Dilma Rousseff has not been accused in the scandal, it has undermined her political support and she’s now facing impeachment on allegations that she used accounting to mask the size of a budget deficit.

Along the way, Moro became a folk hero. Masks of the judge were a favorite in Carnival celebrations; he was named one of Time Magazine’s 100 most influential people. And protesters in March waved balloons of Moro dressed as Superman that stood in stark contrast to the inflatable likeness of Rousseff and her mentor, former President Luiz Inacio Lula da Silva, in striped prison garb.

But he has picked up detractors, too, especially after releasing transcripts from a taped phone conversation between Lula and Rousseff which suggested that she wanted to name Lula a minister to shield him from investigation.

Following the transcript’s release, thousands of Brazilians poured into the streets from Sao Paulo to Brasilia to protest. The backlash by some of Brazil’s political and legal elite was just as fierce. Supreme Court Justice Marco Aurelio Mello, in an interview with Folha de S.Paulo newspaper, said Moro’s “show of force” overstepped his limits, and the Rio de Janeiro branch of Brazil’s bar association branded it illegal.

The Showdown in Brasilia

In Brasilia, meanwhile, the political stand-down that has crippled Rousseff’s government is reaching its culmination, too. A special congressional committee is analyzing the request to oust her. If a simple majority of senators vote as early as next week that she should stand trial, Rousseff would be forced to step aside, at least temporarily. Her successor, Vice President Michel Temer, is already assembling an administration that investors hope will quickly address Brazil’s economic woes.

Moro’s investigation entering a new phase is “pretty good news for Temer,” said Christopher Garman, who analyzes Brazil for Eurasia Group in Washington. “For a Temer government, the real window of risk is over the next four to five months. There are still shoes to drop in Moro’s investigation. If you get past this phase, then the risk for Temer’s government starts to diminish. The bar to undermine his administration is higher than it was under Rousseff.”

Backing that up is the fact that Temer’s was recently mentioned in testimony in the investigation, which didn’t cause many waves, Garman said. The vice president has denied any connection to the scandal.

Throughout his two-year investigation, Moro has maintained that he’d keep pushing ahead so long as the public had his back. But analysts now see public fatigue setting in. Brazil’s recession is stretching into its second year, unemployment is soaring and a big budget deficit is forcing the government to raise taxes and cut spending.

About a dozen years ago, Moro made clear the importance of public support in such endeavors, writing a paper on Italy’s mani-pulite, or "Clean Hands" investigation, often cited as inspiration for Carwash. What he wrote then of that probe seems suggestive of his actions now: “As long as it can count on the support of public opinion, it can move forward and produce good results," he said. "If that doesn’t happen, it will hardly succeed.”

Before it's here, it's on the Bloomberg Terminal. LEARN MORE