Former Brazilian President Luiz Inacio Lula da Silva has been detained for questioning by police investigating a bribery and money laundering scheme linked to state oil giant Petrobras.
His detention on Friday was the highest profile arrest in a sweeping corruption investigation that has ensnared powerful lawmakers and business executives in Latin America’s biggest economy.
Police, who arrested Lula at his home in Sao Bernardo do Campo on the outskirts of Sao Paulo, said they had evidence that he received illicit benefits from kickbacks at state oil firm Petroleo Brasileiro SA in the form of payments and luxury real estate.
The evidence against Lula brought the corruption investigation closer to his protegee and successor, President Dilma Rousseff, who is fighting off impeachment over an unrelated issue and who is struggling to pull the country out of its worst economic downturn in decades.
Lula’s detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition. The real currency gained more than three per cent against the US dollar and the benchmark Bovespa index climbed nearly five per cent. Shares of Petrobras led the rally with a 14 per cent surge.
“Ex-president Lula, besides being party leader, was the one ultimately responsible for the decision on who would be the directors at Petrobras and was one of the main beneficiaries of these crimes,” a police statement said.
“There is evidence that the crimes enriched him and financed electoral campaigns and the treasury of his political group.”
Lula’s foundation said in a statement that his detention was “an aggression against the rule of law and Brazilian society.”
The foundation, which has consistently denied any wrongdoing by Lula, called his arrest “arbitrary, illegal and unjustifiable.”
Federal prosecutors who ordered Friday’s raids said there was evidence that the former president received funds from the graft scheme at state oil giant Petrobras through work on a luxury beach-side penthouse and a country home.
Lula has said the apartment is not his and it belongs to engineering group OAS, but prosecutors say doormen, OAS engineers and third-party contractors all said the condo was intended for Lula’s family.