SAO PAULO/BRASILIA (Reuters) - Brazilian authorities widened a political graft investigation on Tuesday to target telecom firms Oi and Telefonica Brasil over alleged irregular payments to a company part-owned by the son of ex-president Luiz Inacio Lula da Silva.
Oi SA, formerly known as Telemar, and Telefonica Brasil SA, which operates under the Vivo brand, said in statements that they were cooperating fully with authorities.
A lawyer for Lula said he will “await and analyse” the details of the investigation, as it does not directly involve the former president. It was not immediately possible for Reuters to locate a representative for his son, Fábio Luis Lula da Silva.
In total, the group linked to Lula’s son received 193 million reais ($46 million) from telecoms, internet and cable TV companies, according to the investigation.
Police said the newest phase of the Car Wash operation, involving 47 search and seizure warrants, was based on an earlier inquiry into former leftist leader Lula, who was found guilty of bribery in a separate case but last month left jail while appealing.
Prosecutors said that Oi paid more than 132 million reais between 2004 and 2016 to firms in the Gamecorp/Gol group for services they were ill-equipped to provide. They said Lula’s son was part of the controlling ownership group behind Gamecorp/Gol.
“The evidence shows that the biggest asset that Oi/Telemar group sought at Gamecorp was the son of the then president,” prosecutor Robson Pozzobon told reporters in Brasilia.
“As we have seen before in the Car Wash investigation, in business - and we are talking about business with the government - there is no such thing as a free lunch,” Pozzobon said.
Evidence collected from receipts, emails and bank details suggests that Oi benefited from various government decisions in this period, including a decree signed by Lula that authorized Oi/Telemar to acquire Brasil Telecom in 2008, prosecutor Athayde da Costa added.
Prosecutors also said they were looking into alleged irregularities surrounding deals between Gamecorp/Gol and Telefonica Brasil, citing a 40 million reais payment to Editora Gol from Movile Internet Móvel SA, a technology company that provides services to the carrier.
Preferred shares in Oi were trading 2.4% down at 1.22 reais after falling as much as 4.8% earlier on Tuesday. Likewise, Telefonica Brasil’s preferred shares also cut initial losses and were last down around 1% at 56.34 reais.
For Luis Sales, analyst at Guide brokerage, the impact of the investigation on shares of both carriers should be minimal.
“Values involved are lower than those previously seen in the Car Wash, which itself lost some strength recently,” he said.
(Corrects tenth paragraph, prosecutors clarified that 40 million reais were paid by Movile Internet Móvel SA, a technology company hired by Telefonica Brasil, not a subsidiary of the carrier as earlier stated.)
Reporting by Pedro Fonseca in Rio de Janeiro, Gabriela Mello in Sao Paulo and Ricardo Brito in Brasilia; Writing by Jamie McGeever; Editing by Brad Haynes and Alexander Smith