The Car Wash Locomotive

locomotiveA top senator accused Brazil President Dilma Rousseff of playing a role in a graft ring centered on the state oil company, the first time she has been linked to a massive corruption scandal threatening to topple her government.

In plea-bargain testimony released Tuesday by Brazil’s Supreme Court, Senator Delcídio do Amaral, a prominent member of Ms. Rousseff’s Workers’ Party, said that the president not only had knowledge of bid rigging and bribery at state-run Petróleo Brasileiro SA, but also worked with her inner circle to suppress a sprawling criminal probe into the scheme that has rocked the highest levels of the nation’s business and government. Ms. Rousseff has denied wrongdoing and hasn’t been charged with a crime.  Meanwhile, Brazil’s polarizing ex-president, Luiz Inácio Lula da Silva, was talking to Ms. Rousseff on Tuesday about taking a cabinet post, according to people familiar with the situation. Doing so, they said, could provide support to his embattled successor, and give him legal protection against prosecution on money-laundering charges lodged last week, which he has denied. The court testimony surfaced just two days after Brazilians took to the streets nationwide in the country’s largest-ever antigovernment protest to demand the ouster of Ms. Rousseff, whose administration is reeling from a brutal economic downturn, the widening graft probe and rising calls for her impeachment.Ms. Rousseff faces impeachment charges in congress that she manipulated government accounts to hide a growing budget deficit, allegations she denies.

“The news has reinforced the feeling that the end is near,” said Leonardo Barreto, a political consultant in the capital, Brasília. Known as Operation Car Wash, the corruption probe at state oil company Petrobras has ensnared a string of major political and business figures as it has crept ever closer to the presidential palace.

Prosecutors say crooked suppliers and Petrobras insiders colluded to siphon billions from the company to help bankroll the ruling Workers’ Party, or PT, and its allies in congress, allegations the parties deny. According to the plea documents released Tuesday, Ms. Rousseff was aware of all the details of the 2006 purchase of an oil refinery in Pasadena, Texas. Prosecutors suspect Petrobras used the refinery deal to generate funds it allegedly used to pay for millions of dollars of bribes and personally benefit some Petrobras executives, according to the documents. Ms. Rousseff served as chairwoman of the state oil company from 2003 until 2010, when she resigned to run for president. Her office posted a note on its website on Tuesday denying any illegal acts by the president regarding the Pasadena purchase.

Mr. do Amaral also alleged Ms. Rousseff pressured Justice Minister José Eduardo Cardozo to free jailed suspects caught up in the graft probe, according to the documents. Mr. Cardozo left his post in late February, saying he was weary of “political and personal pressure,” without being more specific. The most explosive allegations in the testimony involve Ms. Rousseff’s former chief of staff and current Education Minister, Aloizio Mercadante. Mr. do Amaral said Mr. Mercadante offered him bribes to keep him from turning state’s evidence and becoming what Mr. Mercadante allegedly termed an “agent of destabilization” by cooperating with prosecutors, according to the testimony. Separately, Brazil weekly magazine Veja on Tuesday reported it had obtained secret tape recordings in which Mr. Mercadante is heard offering money and other help to a representative of Mr. do Amaral in return for the senator’s silence. In a hastily organized news conference in Brasília, Mr. Mercadante denied the allegations contained in the plea deal and called for Veja magazine to make its recordings public. “I never tried to interfere with any decision by Delcídio (do Amaral) to accept a plea bargain or not,” Mr. Mercadante said. The minister acknowledged that he had met with one of Mr. do Amaral’s aides to ask about the senator’s family, but said the meeting was his decision and not at the behest of Ms. Rousseff. Ms. Rousseff’s office denied any responsibility for Mr. Mercadante’s involvement with the senator.

“The Car Wash locomotive is running over the government and making it difficult for them to react,” said Christopher Garman, an analyst at Eurasia Group. He said the odds are against Ms. Rousseff finishing her term, which ends in 2018. The Operation Car Wash probe has intensified in recent months as high-profile suspects have turned state’s evidence, moving ever closer to Ms. Rousseff and her political mentor, Mr. da Silva, the nation’s best-known politician. Earlier this month, federal police detained Mr. da Silva for questioning for his alleged role in helping orchestrate a scheme to skim money from Petrobras and channel it to his Workers’ Party. He has also been charged with money laundering for allegedly hiding his ownership in a luxury apartment provided to him by a construction company with close ties to the government, a charge he strenuously denies. A judge hasn’t yet accepted those charges, so Mr. da Silva isn’t a defendant in that case. A charismatic former union leader who headed Brazil from 2003 to 2010, Mr. da Silva has vehemently denied wrongdoing and portrayed the legal actions against him as a smear campaign to tarnish his legacy and damage the leftist government that has led Brazil for 13 years. In his testimony released Tuesday, Mr. do Amaral said that Mr. da Silva tried to obstruct the investigation by ordering underlings to pay bribes to buy the silence of a key witness. At the request of the former president, Mr. do Amaral personally handed over 50,000 reais to a lawyer representing a jailed former Petrobras executive during a lunch at a steakhouse, the senator said in his testimony. With his legal woes growing, Mr. da Silva is in discussions with Ms. Rousseff to become her secretary of government, a cabinet post in charge of bridging relations between the administration and congress, according to people familiar with the situation. Joining Ms. Rousseff’s cabinet would help shield him from any potential prosecution, analysts say. In Brazil, ministers and other sitting officials can only be tried by the nation’s Supreme Court. The so-called Operation Car Wash case is being driven by federal prosecutors, who would have to petition the nation’s attorney general to press charges against Mr. da Silva. “A lot of people assume that, because of the timing, it’s about keeping him out of jail,” said Ivar Hartmann, a professor of constitutional law at the Getulio Vargas Foundation’s law school in Rio de Janeiro.

Mr. do Amaral also implicated other prominent politicians, including members of the PT and allied parties in congress, as well as some members of the opposition. Indicted last November for allegedly trying to buy the silence of a Car Wash witness, Mr. do Amaral chose to cooperate with authorities, in a bid for leniency. He was the PT’s leader in the Senate and president of the upper house’s powerful economic affairs committee. He was released to home detention last month. Mr. do Amaral’s lawyer declined to comment on his client’s testimony.