(Adds details on Temer)
By Pedro Fonseca and Ricardo Brito
SAO PAULO, June 26 (Reuters) - A Brazilian court sentenced former finance minister Antonio Palocci to 12 years in prison on Monday for corruption and money laundering, potentially bringing the sweeping "Operation Car Wash" graft investigation closer to the financial sector.
The ruling by Judge Sergio Moro adds to the pressure on Palocci, who served as finance minister under former President Luiz Inácio Lula da Silva, to reach a plea bargain with prosecutors in a bid to have his sentence reduced.
A deal is expected to be announced by September, when Prosecutor-General Rodrigo Janot finishes his term and is set to be replaced by an appointee of President Michel Temer.
Palocci, who was chief of staff to Lula's successor, Dilma Rousseff, has offered to provide details about the kickback scheme under investigation that could hurt Lula's chances of running in the 2018 election.
Plea bargain testimony from Palocci, once one of Brazil's most powerful politicians, could widen the scope of investigations currently focused on construction and engineering firms to include banks and other corporations.
Palocci was jailed in September on charges he ran a bribery scheme funneling money to Lula's Workers Party.
"The responsibility of a minister is enormous and, therefore, so much be the penalty when he commits crimes," Moro said in his decision.
Palocci is accused of negotiating with Latin America's largest construction group, Odebrecht, to change the terms of tenders to facilitate the company's interest in building seven oil rigs for state oil company Petrobras after it lost the first round of bidding.
Janot said in a 93-page opinion, which was sent to the Supreme Court last week and obtained by Reuters on Monday, that he had no doubt that Temer also was guilty of corruption, based on plea bargain testimony from executives at meat packing company JBS.
The executives said in plea-bargain testimony that the president took nearly $5 million in bribes in return for help resolving tax matters, for freeing up loans from state-run banks and other matters.
Janot is expected to formally present charges against Temer to the Supreme Court as soon as this week. Under Brazilian law, it would then require a two-thirds majority of the lower house to allow the court to try a sitting president - making it unlikely any charges would proceed. (Reporting by Pedro Fonseca; writing by Bruno Federowski and Silvio Cascione; Editing by Jeffrey Benkoe and Bill Trott)