Brazil's ex-president Lula questioned; Rousseff calls it 'unnecessary'

BY BRAD HAYNES AND ANTHONY BOADLE- Sat Mar 5, 2016

Former Brazilian President Luiz Inacio Lula da Silva was briefly detained for questioning on Friday in a federal investigation of a vast corruption scheme, fanning a political crisis that threatens to topple his successor, President Dilma Rousseff.

Lula's questioning in police custody was the highest profile development in a two-year-old graft probe centred on the state oil company Petroleo Brasileiro SA, which has rocked Brazil's political and business establishment and deepened the worst recession in decades in Latin America's biggest economy.

The investigation threatens to tarnish the legacy of Brazil's most powerful politician, whose humble roots and anti-poverty programs made him a folk hero, by putting a legal spotlight on how his left-leaning Workers' Party consolidated its position since rising to power 13 years ago.

Police picked up Lula at his home on the outskirts of Sao Paulo and released him after three hours of questioning. They said evidence suggested Lula had received illicit benefits from kickbacks at the oil company, Petrobras, in the form of payments and luxury real estate.

The evidence against the former president brought the graft investigation closer to his protege Rousseff, who is fighting off impeachment for allegedly breaking budget rules, weakening her efforts to pull the economy out of a deepening downturn.

Rousseff expressed her total disagreement with the police questioning of her mentor, saying in a statement it was "unnecessary" after his voluntary testimony. But she repeated her backing for institutions investigating corruption and said the probe must continue until those responsible were punished.

News of Lula's brief 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 2 percent against the U.S. dollar and the benchmark Bovespa index climbed nearly 4 percent. Shares of the state oil giant Petrobras surged 14 percent.

"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," said a police statement on his detention. "There is evidence that the crimes enriched him and financed electoral campaigns and the treasury of his political group."

Lula responded with indignation at an afternoon news conference, slamming investigators for "disrespecting democracy" and running what he called a media circus instead of a serious investigation.

He told supporters at Workers' Party headquarters that he had already answered the questions that police asked him on Friday and reiterated his assertion that he was not the owner of luxury real estate that investigators have suggested he received as bribes.

Rousseff has also repeatedly denied any wrongdoing. Her labour minister, Miguel Rossetto, said in a public statement that the detention was "a clear attack on what Lula represents."

"This is not justice, this is violence," he said.

Underscoring the deep political passions surrounding the former president, TV images from the street outside Lula's home on Friday showed his supporters clad in red shirts exchanging chants, insults and even blows with opponents.

Dozens of police arrived to break up the altercations, clearing the street by force. Pro-Lula protesters also gathered in a noisy protest outside federal police offices at a Sao Paulo airport where he was taken for questioning.

"VIOLENCE IN THE STREETS"

As the founder and figurehead of his party, Lula's image has been central to huge street protests over the past year, both for and against Rousseff's impeachment, and powerful unions have marched repeatedly in his name.