Brazil police arrest former finance minister in Petrobras probe

By Brad Haynes and Brad Brooks SAO PAULO (Reuters) - Brazilian police arrested former Finance Minister Guido Mantega on Thursday as a sweeping corruption investigation further struck at the heart of the Workers Party (PT) that ran the country for 13 years. Police investigators told a news conference they took Mantega, long a confidant of recently impeached former President Dilma Rousseff and an early member of the PT, into custody at the Albert Einstein Hospital in Sao Paulo. He was there accompanying his wife as she prepared for surgery. Quoting witness testimony, they said Mantega in 2012 had requested a payment of 5 million reais, or about $2.5 million at the time, to benefit the PT. Brazil's longest-serving finance minister of the past 70 years, Mantega in 2012 was also the chairman of Petroleo Brasiliero, or Petrobras, the state-run oil company at the centre of a sprawling political kickback scheme. A few hours after his arrest, federal judge Sergio Moro ordered Mantega released from custody, which he was at about 2 p.m. local time after being detained for eight hours. Moro ruled that Mantega's cooperation with authorities, the fact they had already searched his home, and that he was supporting his wife as she fights cancer all indicated the former minister was unlikely to be a threat to interfere with the investigation. His arrest came two days after Moro decided to put former President Luiz Inacio Lula da Silva on trial for allegedly accepting more than $1 million in bribes from an engineering firm in the Petrobras scandal. Mantega, 67, served as finance minister for almost nine years under Rousseff and Lula, a close friend whom he helped become elected president in 2002. He helped steer Latin America's largest economy through a commodities boom at the height of Workers Party rule, but came under withering criticism in 2011 and beyond as the economy began sliding into its worst recession since the 1930s. Mantega left office in 2015 at the start of Rousseff's second term after years of complaints from critics about faulty economic forecasts and ineffective industrial policies. Attorneys for Mantega did not immediately respond to requests for comment, but his political allies excoriated the decision to arrest him. Workers Party President Rui Falcao called the arrest "arbitrary, inhuman and unnecessary" and questioned the timing of the operation just over a week before municipal elections throughout the country. Police executed warrants for eight arrests and 32 search and seizure operations in five states and the capital Brasilia on Thursday, according to prosecutors. They said the operation targeted Mantega and engineering firms Mendes Junior and OSX Construção Naval SA, part of a commodities empire built by former billionaire Eike Batista. Police named the latest phase of the sweeping two-year-old Petrobras probe "Operation X Files" in a reference to the letter X which Batista included in the name of his oil drilling, mining, shipbuilding and logistics companies. Prosecutors said Batista came to them spontaneously to offer testimony, in which he said Mantega in a November 2012 conversation requested the payment of 5 million reais to benefit the PT. Prosecutors said that Batista eventually made an overseas payment of $2.35 million, or close to 5 million reais, to Rousseff and Lula's campaign architect, Joao Santana, along with his wife Monica Moura. Both have previously been arrested for alleged money laundering in the Petrobras scheme. Prosecutors said they believed the payment was a bribe destined for paying down debts from Rousseff's 2010 campaign, a conclusion denied by Batista, who is under investigation but was not targeted in Thursday's operation. A lawyer for Batista and press representatives for OSX and Mendes Junior could not immediately be reached for comment. (Additional reporting by Patricia Duarte, Alexandre Caverni and Nacho Doce in Sao Paulo, and Pedro Fonseca in Rio da Janeiro; Editing by W Simon and Matthew Lewis)