With the country already reeling from a sprawling bribery and kickback scandal at state oil company Petrobras, the new corruption case could hamper the conservative Temer's efforts to restore credibility. Photograph: (Getty)
The multi-billion dollar scandal broke less than a week after Michel Temer replaced Dilma Rousseff as Brazil's President
Barely a week after he assumed office after the impeachment of his predecessor Dilma Rousseff, Brazil's new President Michel Temer and his government have got embroiled in a multibillion dollar scandal involving the country's largest pension funds.
The government scrambled onTuesday to distance itself from the scandal a day after police arrested five people linked to dubious investments by four huge pension funds of state-run companies, Reuters reported.
Dozens of businessmen and fund managers are suspected of involvement in the fraud scheme valued at around 8 billion reais ($2.5 billion), including the chief executive of the world's biggest beef exporter, it said.
The South American nation is already reeling from a bribery and kickback scandal at state oil company Petrobras after its first woman president was stripped off presidency last week following a nine-month impeachment battle. She was convicted on charges of fudging convicted her on charges of fudging the government's budget by taking unauthorised state loans.
In such a scenario, the new corruption case could hamper the conservative Temer's efforts to restore credibility who vowed to pass reforms to get the formerly booming economy back on track. He has to serve out the rest of Rousseff`s term until elections in 2018.
Temer government assures investigation
Reacting to the scandal, Temer's office said the appointments were made during the 13 years of Workers Party rule that ended with Rousseff's removal. The "irregularities" uncovered by the police had nothing to do with the current administration, the President's office asserted.
"The Workers Party appointed the pension fund directors from the moment it took office in 2003 and they were closely linked to the unions," a Temer aide told Reuters on conditions of anonymity.
"The Workers Party was responsible for the big loss suffered, ironically, by the workers of the state companies who were saving for their retirement," the aide said. "This has not even scratched the image of the new government."
The new government will press for a thorough investigation, the aide assured.
"It will also pushes through proposed legislation that will depoliticise the appointment to directors of state companies."
The investigation into pension funds scandal focuses on investments in overpriced assets, including private equity funds with artificially inflated share prices, according to the federal police.
About 50 politicians are already under investigation under probe in the Petrobas scandal. The coveted appointments of directors to the funds' boards were made by political parties and the probe is expected to spread to Brazil's political establishment.
Meanwhile, the Workers Party declined to comment on the investigation but its president, Rui Falcao, denounced as "arbitrary" a raid and seizure of documents at the home of the party's former treasurer Joao Vaccari, jailed a year ago in the Petrobras scandal. Interestingly, Temer's Brazilian Democratic Movement Part has been deeply implicated in the Petrobas scandal.
(WION with inputs from Reuters)