NEW YORK TIMES
February 16, 2004

Brazil Party Threatened by Videotape Showing Graft
By LARRY ROHTER


PHOTO CREDIT: O Dia
On this 2002 videotape, Waldomiro Diniz, left, a senior government official, met with a numbers game kingpin known as Charlie Waterfall.


RECIFE, Brazil, Feb. 15 — The governing Workers' Party and President Luiz Inácio Lula da Silva have come under increasing fire with the emergence of a two-year-old videotape that shows a senior government official soliciting campaign contributions for two of the party's candidates and offering lucrative political favors in return.

The official, Waldomiro Diniz, was fired Friday, hours after the incriminating video appeared on the Web site of Época, a weekly newsmagazine. But the resulting scandal threatens to engulf the left-wing government led by the Workers' Party, which has always portrayed itself as the only squeaky-clean force in the murky world of Brazilian politics.

Mr. da Silva is the founder of the party and ran three times unsuccessfully for president as its candidate before winning in 2002.

"Lula is confronting the most delicate moment of his administration," the daily Jornal do Brasil warned on Sunday morning.

Opposition leaders have responded to the revelations by calling for a congressional investigation and demanding the immediate resignation of José Dirceu de Oliveira e Silva, the president's chief of staff and the immediate superior of Mr. Diniz.

The president of the Workers' Party, José Genoino, has tried to distance the party from the scandal and the damage it has done by arguing that Mr. Diniz is "not enrolled in the party." But newspaper reports and opposition leaders have countered by noting that Mr. Diniz not only is a former roommate and longtime political associate of Mr. Dirceu but also held one of the government's most delicate jobs, that of the executive branch's liaison to Congress.

"You can say that he is the right-hand man of the right-hand man of the president of the republic," the columnist Eliane Cantanhede wrote in the daily Folha de São Paulo.

The videotape and an accompanying transcript show Mr. Diniz, then the head of the state lottery in Rio de Janeiro, agreeing to rewrite an online lottery contract so as to favor a numbers game kingpin known as "Charlie Waterfall."

In return, the numbers game boss agreed to contribute more than $100,000 to the Workers' Party candidates for governor in Rio and Brasília during the 2002 general election and to pay a 1 percent "tip" to Mr. Diniz.

The numbers scandal has erupted as the Workers' Party is facing other potentially damaging corruption accusations. In São Paulo, prosecutors have reopened an investigation into the January 2002 killing of Celso Daniel, mayor of the city of Santo Andre and a top official in Mr. da Silva's campaign, whose death they now say was the result of a dispute over a multimillion-dollar kickback scheme.

One of Mr. Daniel's brothers has said publicly that a senior government official admitted to him that suitcases stuffed with cash in amounts of up to $600,000 were regularly delivered to Mr. Dirceu, then the president of the party, for a campaign slush fund. The money was said to have been generated by under-the-table payments by winners of bus and other municipal contracts.

Nor is this the first time the Workers' Party has been implicated in a scheme to benefit the "jogo do bicho," the popular but illegal numbers game played all over this nation of 175 million. Mr. da Silva is on record favoring the legalization of the game, whose tentacles extend not only into political parties but also the police and especially Rio de Janeiro's Carnival.

During a parliamentary inquiry in Rio Grande do Sul, Brazil's southernmost state, a former Workers' Party official testified that numbers game bosses there donated $500,000 toward the purchase of the party's new state headquarters. The highlight of the investigation was an audiotape in which a voice said to be that of a party fund-raiser was heard urging the chief of police at that time to go easy on numbers runners.

The former governor and three other senior Workers' Party officials from that state administration are now members of Mr. da Silva's cabinet. A criminal investigation of the numbers payments was started, but it was suspended last year, according to news reports, after Mr. da Silva took power.

Mr. da Silva himself has not commented directly on the new situation. But at an event in Rio on Friday night commemorating the 24th anniversary of the founding of the Workers' Party he expressed his support for Mr. Dirceu and other party leaders.

"The trademark of our party is its ethical behavior and its honor," he said as angry demonstrators chanted outside.