Exclusive: Brazil top court likely to free suspects in 'Car Wash' graft probe - source

By Lisandra Paraguassu and Anthony Boadle
Brazilian federal judge Sergio Moro talks to journalists, as he arrives for the wake of the Brazilian Supreme Court Justice Teori Zavascki, in Porto Alegre, Brazil, January 21, 2017. REUTERS/Diego Vara

By Lisandra Paraguassu and Anthony Boadle

BRASILIA (Reuters) - Brazil's Supreme Court is likely to begin ordering the release next month of suspects in the country's biggest corruption investigation who have been held for months without being brought to trial, a senior judicial source with knowledge of the matter told Reuters.

Such a decision would be a setback for Sergio Moro, the federal judge who has put dozens of oil industry and engineering company executives behind bars in the sweeping investigation into political kickbacks on contracts at state companies, code named Operation Car Wash.

Based on the probe overseen by Moro in the southern city of Curitiba, Brazil's prosecutor general is now seeking to bring scores of politicians to trial in the Supreme Court for taking bribes.

There are only seven suspects being held in Curitiba but they include a former finance minister and the still powerful former speaker of the lower house of Congress, Eduardo Cunha. They would still probably face charges if released.

Moro's use of prolonged detention of a handful of suspects to obtain confessions has attracted criticism of his methods in the two-year-old investigation, though prosecutors say only a fraction of plea bargains were agreed by people held in pre-trial detention.

With the former politicians detained on Moro's orders in Curitiba wielding considerable influence in corridors of power in Brasilia, the issue has become increasingly heated.

"The court will soon begin to free Car Wash people that are being held in Curitiba, in a few months' time, maybe next month," said the judicial source, who asked not to be identified because of the sensitivity of the information. "This will surely happen."

The subject was raised on the court last month by Justice Gilmar Mendes during a hearing on a request for a habeas corpus writ.

Mendes - who has close ties to the PSDB party that forms part of President Michel Temer's coalition and has been drawn into the probe - said the prolonged arrests in Curitiba were largely counter to the jurisprudence the court had established in recent years.

PROSECUTORS DEFEND DETENTIONS

The possibility of the top court revising provisional arrests has annoyed the task force of prosecutors who continue to unravel the biggest case of illegal crony capitalism uncovered in Brazil. Many more politicians are expected to be investigated following plea bargain confessions about paying bribes by 77 executives of the Odebrecht engineering conglomerate.

"The provisional arrests were carried out within the bounds of the law and with solid justifications," a source in the Car Wash prosecuting team said. "This would very much complicate the Car Wash investigation."

Moro ordered 79 provisional arrests in the first two years of the Car Wash scandal, most of which have been gradually revoked or replaced by sentences.

Any release of Cunha, who still wields political influence in Brasilia from his prison cell in Curitiba, could seriously hamper anti-corruption efforts by helping moves in Congress to shield lawmakers from prosecution.

Moro, who has become a national figurehead in the fight against corruption, refuted the criticism in a recent column in Veja magazine in which he said provisional arrests of Odebrecht managers, including the company's former chief executive, were amply justified by subsequent developments.

When the executives decided to cooperate with prosecutors, they admitted to price-fixing on contracts with state-run oil company Petrobras and the systematic payment of bribes not just in Brazil but in other countries, and even having a department dedicated to bribery, he wrote.

"In a situation of systemic corruption ... it is necessary for the judiciary to act firmly and...impose provisional arrests to break the cycle of crime, without concern for the political or economic powers involved," Moro wrote.

(Editing by Daniel Flynn and Alistair Bell)