May 24, 2016 / 12:36 PM / a year ago

UPDATE 3-Brazil police probe U.S. Steel venture, Tenaris pipe unit

* Petrobras boss paid $11.2 mln to grant pipe deals -prosecutors

* Prosecutors say bribes won pipe contracts worth $1.4 bln (Adds additional company comment)

By Jeb Blount and Caroline Stauffer

RIO DE JANEIRO/SAO PAULO, May 24 (Reuters) - Brazilian police said on Tuesday they investigated local units of three international steelmakers in a second-straight day of raids probing graft at the country's state-controlled oil producer, Petroleo Brasileiro SA.

Police and prosecutors allege that Apolo Tubulars, which is 50 percent owned by United States Steel, and Luxembourg-based Tenaris SA's Brazilian unit Confab were involved in a bribery scheme to win work from Petrobras, as the oil company is known. Tenaris is part of Italian-Argentine steel group Techint.

Brazil's largest-ever corruption investigation has unveiled a scheme in which local construction and engineering firms colluded to overcharge Petrobras for work and used the excess funds to bribe high-level officials.

The probe, which forced a key minister in interim President Michel Temer's government to resign on Monday, has ensnared around a dozen international companies over the past two years and caught the attention of U.S. regulators.

Between 2009 and 2012 two tube companies involved in the scheme paid about 40 million reais ($11.2 million) in bribes to Petrobras executives to win about 5 billion reais ($1.4 billion) of pipe contracts, prosecutors said.

Police said they had no proof of corruption at French pipe-maker Vallourec SA but were continuing their investigation of the company's Brazilian unit, Vallourec Brasil, formerly known as V&M.

Rio de Janeiro-based Interoil Representações Ltda also arranged bribes for Petrobras, police said. Interoil Representações declined to speak with Reuters.

In Brazil, Interoil Representações owns 5 percent of the Brazilian unit of German oil tank company Oiltanking GmbH. Police and prosecutors made no mention of Oiltanking and the company was not mentioned in any of the warrants. Oiltanking's Brazilian lawyer did not return calls for comment.

U.S. Steel said it is reviewing the matter and is in contact with Apolo Tubulars. U.S. Steel acquired the 50 percent stake when it bought Lone Star Technologies Inc in 2007. Apolo Tubulars said it was cooperating with authorities but had no other comment.

Tenaris officials did not immediately respond to requests for comment, but Confab said it has no evidence its employees paid bribes and is collaborating with authorities.

Tuesday's actions were the latest in the "Operation Car Wash" probe in which 205 people have been accused and 105 convicted of crimes ranging from price-fixing to kickbacks. Total prison and other sentences total more than 1,333 years.

The Tuesday operation, called "Operation Vice" sought to jail two people, and take nine in for questioning, police said. They also had search warrants for 28 locations.

The sweep was aimed at probing alleged money laundering that used fictitious contracts arranged by Petrobras contractors and an executive in Petrobras' international unit to hide bribes and political kickbacks.

"Some parts of the state still need to go through a detoxification process," the statement said.

On Monday, police arrested a former treasurer of Brazil's Partido Progessista (PP), one of the parties in the country's ruling coalition. He was accused of receiving about 1 million reais ($280,465) in bribes and contract kickbacks.

Operation Car Wash also contributed to the dive in popularity of President Dilma Rousseff who was suspended earlier this month after the Senate voted to put her on trial for breaking budgetary laws, charges she denies. She was chairwoman of Petrobras' board for seven years when much of the corruption took place.

$1 = 3.5705 Brazilian reais Additional reporting by Silvio Cascione; Editing by Frances Kerry and Andrew Hay

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