Politics -Brazil: Corruption Probe Turns To Presidential Advisor

RIO DE JANEIRO, (Jul. 12) IPS - Pres. Fernando Henrique Cardoso is struggling to distance himself from a corruption probe that has focused on a long-time adviser implicated in the misappropriation of public funds.

The case, first brought to light by a parliamentary investigative commission last year, involves the disappearance of 169 million Brazilian "reais," now the equivalent of $94 million but worth much more at the time of their illegal transfer from accounts meant for the construction of the Labor Tribunal in Sao Paulo, a project begun in 1992.

Judge Nicolau dos Santos Neto was accused of being directly involved in illegally elevating the costs of the construction project and is now a fugitive from justice.

Further investigations implicated former senator Luiz Estevao, who was expelled from the Senate in late June due to evidence he took part in the fraud through his construction companies and because he lied in his testimony before the parliamentary commission.

The scandal has touched the president's office because it was discovered that a former secretary general to the president, Eduardo Jorge Caldas Pereira, who served in that post from 1995 to 1998, had at least 117 telephone conversations with Judge Santos Neto during the period in question.

Caldas Pereira worked for Cardoso for 15 years, initially as his adviser in the Senate, later in the Foreign Ministry and the Finance Ministry (from late 1992 to early 1994), and then in the presidential office and finally in Cardoso's election campaign.

There is no denying that the former official enjoyed close personal ties with the president. So when he left the government in 1998 to head Cardoso's re-election campaign but did not return to an executive post, rumors began to fly in Brazil's political circles.

The 117 telephone calls between the judge and the presidential adviser were not a focus of the 1999 parliamentary investigation, but took on importance after Caldas Pereira himself granted an interview to Valor Economico newspaper. The former official attributed the calls to "institutional relations," saying he had hoped to obtain a list of names from Santos Neto so that Pres. Cardoso could choose judges for the Sao Paulo labor court who favored his "Plan Real" for economic stabilization.

The government, said Caldas Pereira, feared the labor judges would raise wages, linking them to increases of other economic variables, a mechanism that fed inflation in Brazil for nearly 30 years, said the former presidential secretary. The acknowledgement that a judge accused of corruption had assisted the president's office revived the issue and sparked new suspicions.

Then, on July 8, O Globo newspaper revealed that the calls the judge made to Caldas Pereira were most numerous in the days leading up to the release of new funds from the National Treasury for the Court of Sao Paulo construction.

Other investigations indicate that the Labor Justice system of Sao Paulo has ruled in favor of wage correction in all 1,270 labor union cases presented since the Plan Real went into effect in early 1999.

It is practically impossible that so many telephone calls "involved only the naming" of new judges, commented current president of the Regional Labor Court of Sao Paulo, Floriano Vaz da Silva.

In response to the rising wave of suspicion, Pres. Cardoso released a statement yesterday in support of a full investigation into the case, "with punishments that make an example, without exception, of those responsible."

The Finance Ministry and the Planning and Budget Ministry stressed that the executive branch of the government does not interfere in resources earmarked for the judicial branch.

Because it is approved in the national budget, the National Treasury is obligated to release the funds each month, without the power to "exercise any audits or monitoring of the Judicial branch's administrative actions," according to a joint statement from the two ministries.

The official communiques represent an attempt to erase suspicions that members of the presidential office or of the cabinet have taken part in fraudulent actions in a construction project that has cost the government four times more than the original budget, and remains unfinished.

But these official explanations have not interrupted the investigations or the doubts that have been wearing on the government, putting its approval rating on a downward spiral since early 1999.

The official statements also shift the blame to the upper echelons of the judiciary, which could generate conflicts between the government branches.

Prosecutors from Brasilia and Sao Paulo hope to question the former presidential adviser, who recently purchased an apartment in Rio de Janeiro for an estimated $1 million.

The strong indications of Caldas Pereira's close ties to the fugitive judge, former senator Estevao and the case of the Labor Tribunal construction project must be cleared up, say the investigators.

In Congress, a movement made up of opposition and governing party legislators alike is working on setting up a new parliamentary investigative commission dedicated specifically to the Caldas Pereira case.

The presidential office is manoeuvering to prevent the creation of the commission, which makes Cardoso's call for clearing up the details of the case "hypocritical," according to O Globo political columnist Tereza Cruvinel.