Brazil prosecutors face pushback from lawmakers in graft probe

By Anthony Boadle

BRASILIA (Reuters) - Politicians suspected of profiting from Brazil's biggest-ever corruption scandal are drafting legislation aimed at letting themselves off the hook, the country's chief prosecutor said on Friday.

The prosecutor, Rodrigo Janot, said he feared Brazil might repeat the errors seen in Italy's battle against corruption two decades ago, effectively allowing politicians to take bribes with immunity.

Italy's "Operation Clean Hands" exposed a web of kickbacks in state contracts in the 1990s but was followed by multiple laws protecting politicians from prosecution and jail.

"When an investigation of this size touches the centers of political and economic power, there is obviously a reaction of self-preservation," Janot told reporters at a news briefing.

Brazil's probe into graft at state-run oil company Petrobras , which began more than two years ago, has led to charges against nearly 250 people and has already seen the arrest, trial and guilty verdicts of some of the nation's most powerful businessmen and political operators.

But bills have been introduced in Congress in recent weeks directly aimed at protecting politicians and implicated businessmen from prosecution, while also curtailing the powers of law enforcement agencies to investigate lawmakers.

One proposed measure would criminalize slush funds used to make illicit campaign donations. But it would also shield politicians involved in the Petrobras scandal because it would not be applied retroactively.

Another bill, amending the rules applied to legal settlements or leniency deals for companies accused of corrupt practices, would exclude prosecutors from the negotiations. It would also safeguard executives from prosecution, once the company reaches a deal.

Deltan Dallagnol, a lead prosecutor in the Petrobras bribery and kickback investigation, warned earlier this week that the bill would be a "death blow" to the probe known as "Operation Car Wash."

"It would bury Operation Car Wash," Dallagnol told a news conference. If adopted, it would lead to the release of jailed executives and the return of seized assets, he said.

In his remarks on Friday, Janot said he trusted Brazil's Supreme Court would block any moves to undermine the fight against corruption.

Brazil's political establishment is bracing for the imminent publication of the plea bargain statements of up to 80 employees of the country's biggest engineering firm Odebrecht, stemming from the company's role in the Petrobras scandal.

That testimony is expected to name up to 200 politicians who took kickbacks, some of whom have already been publicly implicated in the case.

Over one third of the members of Brazil's Congress are under investigation currently for corruption, electoral fraud and other illegal acts, not all related to the Petrobras probe.

Former President Luiz Inacio Lula da Silva, founder of the leftist Workers Party, is facing two separate trials related to the case.

The Petrobras scandal is not directly related to the impeachment of Lula's hand-chosen successor, former President Dilma Rousseff, who was ousted on Aug. 31 for breaking budgetary rules.

But Eduardo Cunha, the former house speaker who led the charge on Rousseff's impeachment, is jailed and facing trial in the case, accused of taking at least $5 million in bribes, and more than 50 other sitting politicians are known to be under investigation.

Despite many challenges, Janot said the Petrobras investigation had benefited from a "very favorable" climate for international cooperation in fighting corruption and tracking graft money.

The United States, Switzerland, France, Spain, Portugal and Italy, among other nations, had all helped Operation Car Wash, he said.

"Have no illusion that Operation Car Wash will rid Brazil of corruption," Janot said. "But I hope it will put an end to the endemic and systematic corruption."

(Reporting by Anthony Boadle; Editing by Tom Brown)

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