December 10, 2019 / 1:53 PM / 2 months ago

Brazil inquiry targets Oi, Vivo over deals linked to Lula's son

SAO PAULO/BRASILIA (Reuters) - Brazilian authorities widened a political graft investigation on Tuesday to target telecom firms Oi and Telefonica Brasil over alleged irregular payments to a company part-owned by the son of former President Luiz Inacio Lula da Silva.

Oi SA, formerly known as Telemar, and Telefonica Brasil SA, which operates under the Vivo brand, said in statements that they were cooperating fully with authorities.

A lawyer for Lula said he will “await and analyse” the details of the investigation, as it does not directly involve the former president. It was not immediately possible to locate a representative for his son, Fábio Luis Lula da Silva.

On Twitter, the ex-president called the latest development in the sweeping five-year-old “Car Wash” investigation a “circus” put on by prosecutors “addicted to the limelight” intent on harming him and “illegally pursuing my children and my family.”

The group linked to Lula’s son received 193 million reais ($46 million) from telecoms, internet and cable TV companies, according to the investigators.

Police said Tuesday’s operation, involving 47 search and seizure warrants, was based on a previous inquiry on the ex-president, who was convicted of taking bribes in a separate case but last month left jail while appealing.

Prosecutors said Oi paid more than 132 million reais between 2004 and 2016 to firms in the Gamecorp/Gol group for services they were ill-equipped to provide. They said Lula’s son was part of the controlling ownership group behind Gamecorp/Gol.

“The evidence shows that the biggest asset that Oi/Telemar group sought at Gamecorp was the son of the then-president,” prosecutor Robson Pozzobon told reporters in Brasilia.

“As we have seen before in the Car Wash investigation, in business - and we are talking about business with the government - there is no such thing as a free lunch,” Pozzobon said.

Evidence collected from receipts, emails and bank details suggests that Oi benefited from various government decisions in the period, including a decree signed by Lula that authorized Oi/Telemar to acquire Brasil Telecom in 2008, prosecutor Athayde da Costa added.

Oi Chief Operating Officer Rodrigo Abreu told a news conference carrier has conducted an internal audit since September 2018 to verify potential irregularities in past payments.

He added that deals with Gamecorp were made by executives who no longer work for Oi and that the planned exit of Chief Executive Eurico Teles from the company on Jan. 30 has nothing to do with the probe.

Prosecutors said they were also looking into alleged irregularities surrounding deals between Gamecorp/Gol and Telefonica Brasil, citing a 40 million reais payment to Editora Gol from Movile Internet Móvel SA, a technology company that provides services to the carrier.

In a statement earlier on Tuesday, Telefonica Brasil confirmed a police investigation at its Sao Paulo headquarters. Separately, Movile said it is collaborating with authorities, though “it is not the main target of the investigation.”

Preferred shares in Oi ended 0.8% down on Tuesday, while Telefonica Brasil’s stock fell 0.3%.

Reporting by Gabriela Mello in Sao Paulo and Ricardo Brito in Brasilia; Additional reporting by Pedro Fonseca in Rio de Janeiro and Jamie McGeever in Brasilia; Editing by Brad Haynes, Alexander Smith and Dan Grebler

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