Prosecutors in Brazil investigate Lula for alleged influence peddling

Brazil's federal prosecutors have opened a preliminary investigation into the country's wildly popular former leader Luiz Inacio Lula da Silva, putting further pressure on his embattled protegee President Dilma Rousseff.

The probe into illicit influence peddling in Cuba, among other countries, comes as federal police also revealed they are also investigating suspected money laundering in transactions by two companies owned by Joao Santana, the political mastermind behind the election victories of Mr Lula da Silva and Ms Rousseff, both of the centre-left Workers` Party, or PT.

The prosecutors' office in Brazil's capital Brasilia confirmed reports by a local magazine that Mr Lula da Silva is being questioned by their anti-corruption unit over claims he helped construction conglomerate Odebrecht win contracts overseas between 2011 and 2014.

Epoca, a weekly magazine, alleged on Friday that Mr Lula da Silva improperly used his influence to obtain loans from Brazil's state development bank BNDES for Odebrecht's dealings in Cuba and the Dominican Republic, often travelling to meet the countries' leaders at the company's expense. The magazine also accused Mr Lula da Silva, one of the PT's founders, of similar influence peddling in Ghana and Angola.

Mr Lula da Silva, Odebrecht and BNDES have denied any wrongdoing.

The prosecutors' inquiry - a preliminary step to decide whether to launch a formal investigation - comes as Ms Rousseff is facing calls for her impeachment over a multibillion-dollar corruption scandal at state-controlled oil company Petrobras.

While Ms Rousseff has not been accused of involvement in the bribery and kickback scheme, she chaired the company when much of the graft unearthed by prosecutors allegedly took place. The PT's treasurer has also been jailed in connection to the scandal. He and the PT have denied wrongdoing.

In the Santana inquiry, Brazilian newspaper Folha de S.Paulo reported that the campaign manager of Mr Lula da Silva`s 2006 re-election bid and Ms Rousseff`s 2010 and 2014 election bids brought in $16m from Angola in 2012 in transactions police suspect were part of a money-laundering operation. Federal police confirmed the contents of the report.

That year, Mr Santana assisted in the election of Fernando Haddad, the PT candidate for Sao Paulo mayor, and helped Angolan president Jose Eduardo dos Santos win election. Police suspect the money from Angola may have been illicit payments to the PT from Brazilian companies operating in the African country. These were allegedly disguised as a legitimate payment to Mr Santana.

But Mr Santana described the allegations as an "fantastical". He rejected any irregularities in the payments and invited authorities to audit the accounts of his group, Polis. "Polis is paid by its clients. It does not pay its clients," he said.

Analysts said the growing tide of investigations against the PT's upper echelons were a threat to Ms Rousseff, who is only in the fifth month of her second term.

"We see the investigation against Lula as meaningful, and a reinforcement of our assessment that Rousseff's larger economic and political liabilities in fact rest with the potential for the corruption probes to grow," Christopher Garman at Eurasia Group wrote in a note.

"Federal prosecutors and police are clearly in overdrive mode and see this as their moment to rid the public sector of corruption," he said.

If evidence emerges of wrongdoing by BNDES, the case would gain further significance given the vast size of the development bank, Mr Garman wrote.

"If [BNDES] is implicated, the risk of investigations bleeding into other sectors of the economy is acute," he wrote, although adding that claims of influence peddling are "vague" given that Mr Lula da Silva was not president at the time.

In a speech to celebrate International Workers' Day on Friday, the former president told adoring crowds that magazines such as Epoca and Veja, which frequently criticise him, were "worthless trash".

"Put together 10 journalists from Veja and from Epoca and they won't have even 10 per cent of the honesty I have," Mr Lula da Silva said.

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