Brazil graft probe could ensnare Eletrobras, foreign firms -prosecutor

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By Caroline Stauffer

CURITIBA, Brazil, June 23 (Reuters) - Brazil's biggest corruption investigation could spread to its biggest electric utility, Eletrobras, and more than a dozen foreign companies, a lead prosecutor said on Tuesday, in a sign of further turbulence for the country's business and political establishment.

Carlos Fernando dos Santos Lima said a scheme similar to one set up as state-run oil firm Petrobras may have operated at Eletrobras, specifically on major projects like nuclear reactor Angra 3 and the $13 billion Belo Monte hydroelectric dam in the Amazon.

In a wide-ranging interview, the Cornell University educated prosecutor said "there are many charges still to come," in a probe he said was likely to continue for at least another two years.

The groundbreaking inquiry has already ensnared dozens of senior executives, battered the popularity of President Dilma Rousseff and rattled the fragile Brazilian economy.

The 16-month old investigation has also turned up evidence of corruption by more than a dozen foreign firms, including South Korea's Samsung Heavy Industries Co Ltd, Swedish builder Skanska AB (Stockholm: SKA-B.ST - news) , Danish oil and shipping group Maersk and British engineer Rolls-Royce Holdings, Lima said.

By investigating another state-controlled company and including so many foreign Petrobras suppliers, the prosecutors have significantly extended the scope of an investigation that claimed one of its biggest scalps yet with the arrest of the chief executive at Brazil's biggest construction and engineering conglomerate Odebrecht SA.

Lima has said he has no doubt that Odebrecht and rival construction company Andrade Gutierrez led a "cartel" that overcharged Petrobras for work and passed on the excess to executives and politicians.

Odebrecht denies participating in a cartel and has called the arrests illegal. Prosecutors must present charges within 30 days of arrest.

PLEA DEALS

Lima said his task force is not investigating former President Luiz Inacio Lula da Silva's ties to Odebrecht's CEO Marcelo Odebrecht, as some Brazilian media have suggested could happen.

"At this point the former president is not part of the investigation," said Lima. "All we have until now is just news in the press ... The fact is, if we find cause, we will investigate him like anyone else."

Lima also said lawyers for Odebrecht and other executives arrested on Friday have not offered any signs of interest in plea deals, which have been a key driver in widening the investigation so far.

The investigation focusing on bribes at Petroleo Brasileiro SA, or Petrobras, has also implicated senior lawmakers from Rousseff's Workers' Party.

Rousseff is not being investigated, but her approval ratings have cratered because of her party's ties to the scandal and fears that economic fallout from the investigation will tip Brazil into recession this year.

Prosecutors are sharing their investigation of foreign companies with the Department of Justice and the Securities and Exchange Commission in the United States, which wants to make sure companies comply with the Foreign Corrupt Practices Act. Odebrecht is also accountable, as it lists bonds in the U.S. Lima said.

Rather than facing prosecution and potential disqualification from future tenders with the Brazilian government, Lima said he hoped foreign firms would agree to admit wrong doing, pay fines and collaborate with the investigation.

More than one already has, he said, declining to give names.

The Maersk Group said in a statement it reiterated its policy of working against corruption. Bribes and kickbacks are strictly forbidden for any employee at Maersk or third party working with the company, it said.

Norte Energia, an Eletrobras-led consortium building the Belo Monte hydroelectric plant, said it was not aware of being the subject of an investigation.

The other companies did not immediately respond to request for comment.

Both Belo Monte and Angra 3 are still under construction and have been hit with multiple delays.

(Additional reporting by Brad Haynes, Asher Levine, Jeb Blount and Walter Brandimarte; Editing by Mary Milliken and Christian Plumb)