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Last Updated: Wednesday, 27 July, 2005, 04:01 GMT 05:01 UK
New allegations in Brazil scandal
By Steve Kingstone
BBC News, Sao Paulo

Jose Dirceu
Mr Dirceu used to be one of the most powerful figures in the government
A Brazilian parliament hearing into alleged corruption has been told the president's ex-chief-of-staff knew of illegal loans to the ruling party.

The claim was made by the wife of an advertising executive who has admitted lending the party nearly $17m (10m).

The money was never declared to the country's electoral authorities.

Jose Dirceu resigned as chief-of-staff last month, denying allegations that the money had been used to bribe lawmakers.

Until his resignation, Jose Dirceu was one of the most powerful figures in the government.

As chief-of-staff he co-ordinated policy and for a time handled relations between the presidential palace and parliament.

Closer to president

The allegation made on Tuesday is that Mr Dirceu knew of off-the-books loans made to the Workers' Party by Marcos Valerio, a wealthy advertising executive.

At a parliamentary hearing, Mr Valerio's wife, Renilda, said her husband had told her of Mr Dirceu's involvement and that the then chief-of-staff had even had meetings with bank managers about the loans.

If that is true, it will bring these allegations one step closer to President Luiz Inacio Lula da Silva, who counted Mr Dirceu among his closest advisors.

The president has said that if there was corruption in his government, he was not aware of it.

Likewise, Jose Dirceu flatly denies any wrongdoing and recently said he was being politically lynched without a shred of evidence.

It has been claimed that Mr Valerio's millions were used to buy the votes of lawmakers on key legislation.

Mr Dirceu will have his say at the parliamentary hearing next week.

Q&A: Brazil corruption claims
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Country profile: Brazil
28 May 05 |  Country profiles

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