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(Corrects headline and first paragraph to say $40 million, not 40 million reais)
By Pedro Fonseca
RIO DE JANEIRO, April 13 (Reuters) - A former senior executive of Brazilian engineering company Odebrecht SA has accused President Michel Temer of presiding over a meeting to solicit a $40 million illegal payment in 2010, according to video testimony released on Tuesday.
Prosecutors have said Temer cannot be investigated for offenses committed before he assumed the presidency in 2016, but the testimony could dent his credibility as he seeks unpopular reforms to restore confidence in Brazil's economy.
Executive Marcio Faria da Silva, the former vice president of Odebrecht's industrial wing, said in the video testimony that the meeting took place in Temer's legal office in Sao Paulo.
In addition to Temer, former lower house speaker Eduardo Cunha and Congressman Henrique Eduardo Alves from Temer's PMDB party took part, according to testimony which was among a trove of plea bargains by Odebrecht executives made public by a Supreme Court justice on Tuesday.
Temer's office confirmed in a statement he had met with Faria in 2010 in the presence of Cunha, but denied that Alves participated. It said Temer had never discussed values with Faria.
Justice Luiz Edson Fachin released the testimony this week after announcing investigations into nearly 100 senior politicians as part of the Operation Car War probe into political kickbacks on contracts with state companies, particularly oil firm Petroleo Brasileiro SA.
The Odebrecht executive alleged that, while Temer did not speak about any figures, Cunha made it clear that a payment was expected.
"Eduardo Cunha spoke. 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.
Representatives for Alves and Cunha, who is in prison pending trial on other charges, could not be immediately reached for comment.
The new allegations came at a time when Temer is trying to slash welfare spending and incentivize private investment, moves which have lifted Brazil's stockmarket and currency. The veteran politician already faces a case in Brazil's top electoral court over illegal funding of the 2014 election when he was the running mate of former President Dilma Rousseff.
Temer's office said in its statement that the conversation with Faria in 2010 was "quick and superficial" and did not touch any discussion of Petrobras contracts or financial amounts.
"The president categorically disputes any involvement of his name with vested interests," the statement said. "He never acted in the name of special interests in Petrobras nor defended the payment of incorrect values to third-parties."
The amount of the payment allegedly requested in the 2010 meeting was based on a 5 percent levy on a contract between Odebrecht and Petrobras worth $825 million for the maintenance of the state oil companies' assets in 9 countries.
Asked if it was clear the meeting was to request a bribe, Faria told investigators: "It was clearly about an unfair advantage, because it was a percentage on top of a contract."
The executive said that once the contract was won, the payment was made in cash in Brazil and to foreign bank accounts. The PMDB took 4 percent of the value of the contract, leaving 1 percent for the left-leaning Workers Party that controlled the presidency at the time. ($1 = 3.1215 reais) (Reporting by Pedro Fonseca in Rio de Janeiro; Writing by Daniel Flynn; Editing by Andrew Hay)