Alleged Petrobras TX Refinery Graft Prompts Brasil Police Raids

Brazilian police and prosecutors investigating corruption at Petroleo Brasileiro SA said on Monday they have evidence that bribes were paid as part of the state-run oil company's 2006 purchase of Pasadena Refining Systems Inc in Texas.

At a news conference announcing a new round of arrests and searches in a nearly 20-month investigation of price-fixing, bribery and political kickbacks at Petrobras, as the company is known, federal prosecutor Carlos Fernando dos Santos Lima said the bribes related to the Pasadena Refinery could lead to the annulment of the purchase.

The searches and arrests are also related to the Petrobras lease of two offshore drilling rigs and the construction of its Abreu e Lima, or RNEST, refinery in Brazil's northeast.

A congressional investigation concluded last year that Petrobras lost $660 million on a deal said to have cost the company $1.2 billion. Former Petrobras officials involved in the Pasadena Refinery purchase said at the time that the refinery itself cost less than $500 million.

Prosecutors said on Monday Petrobras lost $792 million on the Pasadena deal.

In a statement, the police said officers were executing 11 search and seizure orders and had warrants to arrest two people. The warrants were issued as part of the 20th phase of the so-called "Operation Car Wash" investigation.

Another five people are also being ordered to appear in court in Curitiba, in southern Brazil, where they will be questioned, the statement said.

Dozens of leading Brazilian construction and engineering executives and politicians have been arrested or are under investigation for overcharging Petrobras and other state-led firms. Prosecutors say that the proceeds of many suspect contracts were used to bribe Petrobras officials and members of President Dilma Rousseff's ruling coalition.

They said the investigation was based on information provided by a money changer who was the intermediary in the alleged payment of more than $5 million in bribes to senior executives at Petrobras' fuels-distribution division BR Distribuidora SA.

By Sergio and Spagnuolo