Kickbacks scandal hits Brazil president

A deepening political scandal which has already caused the first impeachment of a senator in Brazilian history is closing in on President Fernando Henrique Cardoso after a note surfaced showing he requested more money for a corruption-plagued construction project.

This week Mr Cardoso denied any wrongdoing after the note was published in the daily Folha de Sao Paulo newspaper. Two days earlier he had stated that he was not involved in the funding.

The Folha de Sao Paulo said: "The president's moral integrity is not in question. But the way his administration functions certanly is. It is inadmissible for the government to admit that the president signs documents without reading them."

"They basically have found a smoking gun," said David Fleischer, professor of politics at Brasilia University. "This is very worrisome for Cardoso."

The scandal concerns the theft of up to £60m of public funds from the building of a Sao Paulo courthouse to handle employment disputes.

In 1999, a congressional inquiry revealed that the person responsible for the project, senior judge Nicolau Dos Santos Neto, had helped to steal the money. The courthouse is still unfinished, most of the money is missing and Mr Dos Santos Neto is on the run.

Last month the affair claimed its most important scalp when congress impeached Senator Luiz Estevao, a prominent developer, over accusations that his company was the main beneficiary of the kickbacks. It was the first time that a member of the senate has been impeached in its 170-year history.

The impeachment was hailed as a significant shift in the culture of political impunity in Latin America's largest country.

There are demands for the resignation of the planning minister, Martus Tavares, who recommended the release of the extra money. Mr Tavares allegedly offered his resignation but it was refused, according to reports, because that would be an admission of guilt.

Mr Tavares criticised media reports for "opportunism", and said his ministry "understands that such news reports reflect, on the one hand, a lack of understanding of the budgetary process, and on the other, bad faith and opportunism by people interested in distorting facts to win political visibility".

In a special edition released after his statement, the political magazine Istoe quoted from taped conversations suggesting that Mr Tavares and Mr Cardoso's former chief of staff, Eduardo Jorge, were involved in the kickback scheme.

Members of congress voiced outrage over the revelation that the administration rubber-stamped the extra funding for the courthouse, with one senator from a party allied to the government demanding Mr Tavares' resignation.

Opposition members of congress - eyeing October local elections - went further, calling for a congressional probe into Mr Cardoso and his administration.

But economists fear that a congressional inquiry would bleed Mr Cardoso of support as he tries to implement his economic reform programme - seen as crucial to help the country recover from last year's devastating collapse of the currency.