BRASILIA/RIO DE JANEIRO (Reuters) - Brazil's President Michel Temer denied on Thursday that he hosted a meeting in 2010 where an executive of engineering firm Odebrecht SA [ODBES.UL] was asked to arrange an illegal payment of $40 million (32 million pounds) to his political party.
The graft accusation, which Temer dismissed as "a lie," was made in plea bargain testimony by Marcio Faria da Silva, a former vice president of the industrial arm of scandal-plagued Odebrecht.
Though potentially damaging to his credibility, and efforts to shore up Latin America's biggest economy, Faria's allegation does not threaten Temer's hold on power. As president, he has temporary immunity for anything that occurred before he took office last year.
The accusation was made public on Wednesday as part of a rash of plea bargain deals by 77 Odebrecht executives caught up in a massive corruption scheme.
Faria said he met with Temer in 2010 in his Sao Paulo legal office, together with former lower house speaker Eduardo Cunha and Congressman Henrique Eduardo Alves, all members of the Brazilian Democratic Movement Party (PMDB).
At the meeting, the payment was requested as a 5 percent levy on a contract Odebrecht was seeking from state oil company Petroleo Brasileiro SA's (PETR4.SA) for the maintenance of assets in nine countries, Faria said.
Temer confirmed in a video statement posted on social media that he took part in a meeting with a company executive in 2010 but there was no talk of an illegal donation.
"It is a lie that in that meeting I heard any reference to money or any shady dealings between the company and politicians," the president said.
Earlier on Thursday, Temer's office confirmed in a separate statement he met with Faria in 2010 in the presence of Cunha for a "quick and superficial" meeting, but denied that Alves participated.
Representatives for Alves and Cunha, who is in prison pending trial on other charges, could not be reached for comment.
The testimony by Faria was among dozens of plea bargain testimonies released by Supreme Court Justice Luiz Edson Fachin.
Based on the testimony, Fachin ordered investigations into nearly 100 politicians as part of the Operation Car War probe into billions of dollars in bribes and illegal kickbacks on contracts with state companies, particularly Petrobras.
The allegations come as Temer is trying to push an overhaul of Brazil's pension system through Congress, part of a business-friendly agenda that has sparked a rise in Brazil's stockmarket and currency. Congress is due to start discussions of the reform next week.
Some lawmakers on Thursday said the government would look to speed up the passing of reforms now that so many politicians were under investigation, but admitted that such a move might prove difficult.
In his testimony, Faria alleged that, while Temer did not speak about any figures, Cunha made it clear that a payment was expected.
"He explained that we were seeking a contract with Petrobras. A commitment that it would be signed would require a very important contribution to the party," Faria said, adding it was clear that a bribe was being sought.
Once the contract was won, the payment was made in cash in Brazil and to foreign bank accounts, Faria said. He said the PMDB took 4 percent of the value of the contract, leaving 1 percent for the left-leaning Workers Party of then-President Luiz Inacio Lula da Silva.
Odebrecht's former Chief Executive Marcelo Odebrecht, currently jailed for his part in the Car Wash scheme, said in a separate plea bargain deal that he had made available $40 million to Lula. He said the payment was negotiated via a minister, not with Lula himself.
Lula also denied any wrongdoing on Thursday while hinting that he was gearing up for presidential elections next year, despite five court cases pending against him related to Operation Car Wash.
Elected as Brazil's first working class president in 2002 and returned to office four years later, Lula is ahead in opinion polls for the 2018 vote.
"I will fight if they let me fight and I will prove that this country can be happy again," Lula said, adding that "plea bargains have to be proved."
Reporting by Pedro Fonseca in Rio de Janeiro; Writing by Daniel Flynn; Editing by Andrew Hay and Tom Brown