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Brazil prosecutors target far-right candidate’s economic adviser – source

By Brad Brooks and Gram Slattery

SAO PAULO (Reuters) – The chief economic policy adviser to Jair Bolsonaro, Brazil’s leading presidential candidate, is being investigated by federal prosecutors for allegedly taking part in fraud linked to the pension funds of major state-run companies, a prosecutor with direct knowledge of the case told Reuters.

The investigation, first made public by the Folha de S.Paulo newspaper on Wednesday, alleged that the adviser, Paulo Guedes, mismanaged 1 billion reais that public pension funds injected into his investment vehicles starting in 2009.

Prosecutors are probing a decision to invest in a company in which Guedes was the controlling shareholder, along with tens of millions of reais in payments made as speaking fees to unknown parties using some of this money, the prosecutor said, confirming Folha’s reporting.

Bolsonaro, who met Guedes for the first time last year, is not accused of any wrongdoing. The newspaper, citing court documents, said Guedes allegedly worked with executives at the pension funds with strong ties to the leftist Workers Party. The party’s candidate, Fernando Haddad, is Bolsonaro’s rival in this month’s presidential run-off.

This is the first time that a member of Bolsonaro’s inner circle of advisers has been the subject of a major corruption investigation. Bolsonaro has said Guedes would be his economy minister if he wins the election.

In the past four years, Brazilian investigators have discovered what some have called the world’s largest political corruption schemes ever found, put in place under the Workers Party’s 2003-2016 governments and involved several mainstream political parties.

The extent of the graft schemes has fueled Brazilian voters’ outrage at traditional parties, helping to propel the anti-establishment Bolsonaro to the top of the presidential field.

The document seen by the newspaper said the alleged fraud took place at seven public pension funds, including those for employees from state-controlled oil company Petroleo Brasileiro SA, Banco do Brasil, state bank Caixa Economica Federal [CEF.UL] and the postal service.

A representative for far-right candidate Bolsonaro, whose campaign is founded on an anti-corruption and anti-crime message, did not respond to a request for comment. It was not immediately possible to reach Guedes.

Calls to Brazilian prosecutors were not immediately returned.

The newspaper said the investigation was opened on Oct. 2, five days before Brazil’s first-round presidential vote in which Bolsonaro took 46 percent of the ballots, while Haddad had 29 percent. The two will face each other in an Oct. 28 runoff.

According to the Folha report, investment firms controlled by Guedes launched two funds in 2009 that received 1 billion reais ($269 million) from the public entities over six years.

That year, 62 million reais were then injected into a company known as HSM Educacional, which Guedes allegedly controlled. The firm allegedly acquired 100 percent of a separate private company, HSM do Brasil, the paper said.

The latter firm allegedly operated as a front rather than a legitimate business, according to the investigators’ document seen by Folha.

Investigators are looking at millions of reais that HSM do Brasil paid out to speakers at various investment events in Brazil as well as millions spent on personnel.

(Reporting by Brad Brooks and Gram Slattery; Editing by Dan Flynn and Jeffrey Benkoe)

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