November 20, 2014 / 7:28 PM / 3 years ago

Tenacious Brazilian judge oversees deepening Petrobras probe

CURITIBA, Brazil, Nov 20 (Reuters) - In a country where big court cases often drag on for a decade or more and abruptly fall apart on technicalities, the man leading a bribery probe at Brazil's state-run oil firm Petrobras is described by allies and even rivals as perfectly suited to the task.

Meticulous, formal and reserved, federal judge Sergio Moro has successfully presided over high-profile money laundering cases for 11 years, and wrote a book on the subject after studying in the United States.

Moro, 42, is now pushing forward a case that has already seen dozens of arrests of major construction and oil executives, shaken Brazil's economy and become the biggest crisis to date for leftist President Dilma Rousseff, who was chairwoman of Petrobras' board from 2003 to 2010.

The probe will deepen further in coming months, prosecutors working on the case told Reuters, and could ultimately involve some of Brazil's banks, other companies, and politicians including some in Rousseff's Workers' Party.

Petroleo Brasileiro SA, as it is formally known, is accused of systematically overpaying for assets and contracts.

Prosecutors say the excess money, which some reports have estimated at about $8 billion, was diverted to political parties. Petrobras has neither confirmed nor denied the allegations but has started an internal investigation.

With the fortunes of a $68 billion company and powerful politicians and executives potentially in the balance, dozens of lawyers are waiting to pounce on Moro if he makes the slightest mistake.

But Moro, a voracious reader who occasionally rides his bicycle to work, has taken courses at Harvard Law School and teaches a criminal law class on Fridays, hasn't given them much to work with.

"He makes the lawyer's job difficult here," conceded Antonio Figueiredo Basto, who represents one of the main defendants in the case. He called Moro "correct, rigorous and tough" after a deposition this week in Curitiba, the southeastern city where the judge is based.

OPERATION CAR WASH

Under Brazil's complex legal system, judges often take a more active role in advancing cases than in the United States and other countries.

In the Petrobras scandal, federal police and prosecutors from the public ministry, an independent judicial body, gather evidence while Moro makes key decisions about whom to arrest and how to guide witness testimony.

He has drawn some criticism, especially from Workers' Party officials who complain that leaked details of witness testimony during this year's presidential election campaign seemed timed to damage Rousseff, who won re-election anyway. Moro has denied making any improper leaks.

When asked by Reuters about the Petrobras probe, known here as "Operation Car Wash," Moro showed trademark reserve in replying by email that he "unfortunately" could not comment on a case in his court. "I hope you understand," he added.

His previous investigations include one he oversaw from 2003 to 2007 that is still Brazil's biggest money laundering case. It involved $28 billion in funds illicitly transferred abroad from several Brazilian banks, including the now defunct Parana state bank Banestado, and resulted in 97 convictions.

The experience led Moro "to be even more diligent, more careful" so that his work holds up in higher courts, said Anderson Furlan, a fellow judge who went to college with Moro and has known him for years.

TACTICS

In the Petrobras case, Moro has won praise for two important tactical decisions.

The first, somewhat rare in Brazil, was to approve immunity or reduced sentences to witnesses who collaborate.

A promise of reduced sentences led Alberto Youssef, a money-changer who allegedly shuttled funds around as part of the Petrobras scheme, and former Petrobras senior executive Paulo Roberto Costa to name other individuals and companies involved.

Their testimony has led to major breakthroughs, including the arrest last week of another Petrobras executive, and the leaders of some of Brazil's top construction firms.

Moro's second key tactical move was to go after private-sector executives and money men first, accumulating evidence before pursuing any politicians involved.

That's due to an unusual legal provision in Brazil, which says that top politicians, including members of Congress, can only be judged by the Supreme Court.

The risk is that, if and when politicians are formally named in the probe, Moro could lose control of the case.

As a result, Moro has directed Youssef, Costa and other witnesses not to name politicians for now in their depositions, according to Furlan and court aides.

Nonetheless, prosecutors say they will pursue the money trail in the case, no matter who is involved.

"This scheme is not restricted to Petrobras," said Carlos Fernando dos Santos Lima, one of six main prosecutors from the public ministry on the case, told Reuters.

He said prosecutors are in talks with some of Brazil's largest banks about whether they were involved in any of the money laundering. He declined to confirm who they were, and said it was too early to know if they might face prosecution.

Lima also said public prosecutors have been in contact with the U.S. Department of Justice for months and provided information about Petrobras to the U.S. Securities and Exchange Commission.

Those bodies have not yet confirmed their roles or that they are investigating Petrobras.

In response to media reports that the Supreme Court has the names of 70 politicians allegedly involved, Lima said "it's less than that" but declined to elaborate.

Federal police expect the investigations in Curitiba to last at least two years, one of Moro's assistants said.

The Supreme Court moved to release some of the prisoners in May but Moro warned Costa could try to flee the country and they are back in custody.

His supporters say Moro's investigation could not only clean up Petrobras but also Brazil's reputation at home and abroad.

"We hope the money will be returned to public coffers for all the honest Brazilians who pray for justice in a country known around the world as the land of impunity," said Furlan, the local judge. (Reporting by Caroline Stauffer; Editing by Brian Winter and Kieran Murray)

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