BRAZIL: SENATE PRESIDENT ABDICATES AMID AVALANCHE OF CORRUPTION CHARGES.

By Matthew Flynn

[The author writes for the International Weekly Edition of the Gazeta Mercantil, a Sao Paulo-based financial newspaper]

Jader Barbalho left the presidency of the Senate on Sept. 18 after the numerous charges of corruption that spanned his entire political career left him isolated even from his political party--the Partido do Movimento Democratico Brasileiro (PMDB). This is the first time in the Senate's history that the chamber's president has abandoned the post.

Despite a strong behind-the-scenes fight in the Senate, Barbalho could not stem the tide of allegations that included misuse of funds of the state bank in Para, the senator's home state, involvement in fraud at the now defunct national office for Amazon development (Superintendencia de Desenvolvimento da Amazonia, Sudam), and links to irregularities in the emission of agrarian debt certificates.

"In respect for the institution over which I preside by the free choice of my fellow senators, who recognized my qualities for the position..., and in return for their trust in me, today I leave the presidency of the Federal Senate," said Barbalho in his resignation speech.

The senator refrained from attacking another party allied to the governing base, the Partido da Frente Liberal (PFL), whose participation in the corruption investigation was pivotal. An attack on the PFL would have created greater political turmoil. But significant ruptures are evident in the ruling coalition and are likely to increase as preparations for presidential elections scheduled for next year gain momentum.

The rise and fall of Jader Barbalho

Jader Barbalho rose to political prominence after attacking the Senate's former president Antonio Carlos Magalhaes (PFL) last year. The clash of the political giants captured the attention of Brazilians across the country and caused significant damage to the upper house.

In his resignation speech, Barbalho admitted that he had proposed a truce with his archrival when he assumed leadership of the Senate. In return for Barbalho agreeing to remain neutral during Magalhaes' defense against charges of violating the secrecy of a Senate vote, Magalhaes would stop attacking the new Senate president. The condemnation of Magalhaes by the population and his colleagues could not be contained, however, and he was forced to leave the Senate (NotiSur, 2001- 06-08). Barbalho then became the next target.

As soon as Barbalho assumed the leadership of the Senate, accusations of fraud and corruption began to circulate. Opposition parties demanded the creation of a legislative investigation (Comissao Parlamentar de Inquerito, CPI) on corruption, but political maneuvering by President Fernando Henrique Cardoso (see NotiSur, 2001-05-11) blocked the creation of a CPI, which has broad, sweeping powers.

Nevertheless, allegations against Barbalho kept coming. Besides being accused of using his political influence to extort funds from businesses linked to the defunct Sudam, the Senator was alleged to have benefitted from the emission of agrarian debt certificates in 1988, when he was minister of agrarian reform.

In a separate case, strong evidence provided by the Central Bank suggested that, when Barbalho was governor of the state of Para, he embezzled money from the state bank (Banco Estatal de Para, Banpara).

In July, opposition parties requested that the Senate Ethics Committee open an investigation. To avoid a Senate inquiry, Barbalho took a 60-day leave of absence from his post so that the investigation would be carried out by the attorney general's office. The tactic did not work, however, and the Senate began an investigation.

In his deposition to the Ethics Committee, Barbalho denied all accusations and claimed that he was the victim of a "political hanging."

"It was necessary to destroy me and attack the PMDB," said Barbalho. "That was my crime."

The Ethics Committee's report said, however, that there was "irrefutable evidence" that Barbalho benefitted from the irregularities at Banpara. The committee condemned the senator for lying about his participation in the scandal and for using his power as Senate president to obstruct investigations.

"I have no doubt that Jader benefitted from the embezzlement of resources from Banpara," said Sen. Heloisa Helena of the Partido dos Trabalhadores (PT).

By stepping down from the presidency, Barbalho was able to postpone the vote on the Ethics Committee's report for one week. It is likely that he exited the Senate before a vote on impeachment proceedings was taken to avoid having his political rights suspended for eight years.

Turbulence in the Senate has yet to subside

Finding a replacement for Barbalho has not escaped the political infighting, and as next year's presidential elections come closer, maneuvering within the ruling coalition will continue to disrupt legislative proceedings.

When President Cardoso affirmed that the Senate presidency would remain with the PMDB, leaders of the country's largest and most diverse political party had to find a candidate acceptable to the Cardoso administration as well as to the rest of the Senate.

The first casualty in the search was former President Jose Sarney (1985-1990), who many thought would be able to return order to the upper house. But, because of his close relations with Magalhaes and members of the PFL, his candidacy was blocked.

In the end, the PMDB leadership decided on Ramez Tebet, who was heading the National Integration Ministry. But the vote to elect Tebet has already foreshadowed continued controversy in the Senate. Tebet only received 41 votes from among the 75 senators present; the opposition and members of the PFL together cast 31 blank ballots.

"The hostility is going to continue," predicted Sen. Jose Eduardo Dutra of the PT.

Tebet said his first priority is "to put the chamber in order and make the Congress function." Since the crisis involving the violation of secrecy in the upper house voting panel, "accusations and internal fighting have practically ground the Congress to a halt," he said, adding that he was "aware that the machine gun is ready and aimed" at him now.

PFL leaders said that they made a truce with the new Senate president and would only create problems if Tebet attempted to protect Barbalho. By maintaining pressure on Tebet, viewed as a confident of the dethroned senator, the PFL hopes to put itself in a better position to elect one of its own as the ruling coalition's candidate for next year's presidential elections. The PFL is currently putting all its political capital behind Gov. Roseana Sarney of Maranhao.

Corruption investigations close in on Paulo Maluf 

Meanwhile, an investigation of corruption charges has reached another important political figure. A CPI organized by the Sao Paulo City Council has accused Paulo Salim Maluf, former mayor of Sao Paulo, of having laundered up to US$200 million abroad.

The Sao Paulo state board of attorneys is also looking into allegations of overbilling and embezzlement while Maluf and Celso Pitta were mayors of Sao Paulo. Maluf is accused of having an account with US$200 million in a tax haven on Jersey in the Channel Islands. The Sao Paulo Civil Police is also investigating Maluf in connection with a court-ordered debt scheme involving more than US$600 million.

In a parallel investigation, a CPI on education has accused Maluf and Pitta of failing to invest 30% of the city's budget in education as mandated by law between 1995 and 2000, and it has requested that their political rights be suspended.

The investigation into Maluf's financial activities will not be possible without greater international cooperation.

"Without exchanging information [with Switzerland] about irregularities, combating money laundering is impossible," said Adrienne Sena, president of the Conselho de Controle de Atividades Financeiras (Coaf).

Motions by Maluf to prevent investigators from looking into his and his family members' bank and telephone records have been rejected by the courts.

"We want to know if the money that is in Jersey came from here," said Anna Martins of the Partido Comunista do Brazil (PC do B) and president of the CPI on public debt. The inquiry aims to find out why the city's debt increased 114% while Maluf was mayor.

Possible origins of embezzled funds include a slush fund for public works. The state attorney general's office has already confirmed that some US$40 million was misappropriated during the construction of the Ayrton Senna tunnel during his administration.

Maluf denies having an account in Jersey and says the recent accusations can be traced to a Swiss-based militant of the PT.

Since 1994, Maluf has undergone numerous investigations into his affairs. There has only been one definitive ruling against him. In it, Maluf had to return some US$200,000 to the public treasury.

The former mayor of Sao Paulo and leader of the Partido Popular Brasileira (PPB) is being very careful in his defense in the latest scandal, since he has his eye on the race for governor next year. Brazilians, meanwhile, have added a new word to their vocabulary--malufar (to maluf)--to steal.