UPDATE 3-Brazil police arrest bankers, politician in raids

(Adds comments by police including Federal Reserve link, paragraphs 7-8; Dantas' lawyer, paragraph 15)

By Eduardo Simoes

SAO PAULO, July 8 (Reuters) - Brazilian police arrested a prominent banker and the former mayor of Sao Paulo among others in raids on Tuesday that put the spotlight back on a bribery scandal that rocked the government in 2005.

Banker Daniel Dantas, the head of the Opportunity financial group, was arrested on charges of money laundering and tax evasion that arose from the "monthly allowance" scandal that hit President Luiz Inacio Lula da Silva's first administration, federal police said.

Investor Naji Nahas and former Sao Paulo Mayor Celso Pitta were also arrested for involvement in Dantas' suspected ring, which focused on diverting public funds, police said.

The federal police said 300 officers took part in the operation in Rio de Janeiro, Sao Paulo, the capital Brasilia and in the northeastern city of Salvador. They had 56 search warrants and 24 arrest warrants as part of the probe, which police said was the result of 4 years of investigations.

A police spokesman said Dantas was the head of "a criminal organization involved in various crimes and which had front companies for diverting public funds."

The Lebanese-born Nahas was additionally accused of running a money-laundering operation that used the black market in foreign exchange, the police said in a statement.

Nahas even received information from a "mega-contact" at the U.S. Federal Reserve, said police commander Protogenes Queiroz, who coordinated the operation.