Former Brazilian president detained in connection with bribery and money laundering investigation

Former Brazilian president Luiz Inacio Lula da Silva was detained for questioning in a federal investigation of a bribery and money laundering scheme that police said had financed campaigns and expenses of the ruling Workers Party.

His detention was the highest profile arrest in a sweeping corruption investigation that has ensnared powerful lawmakers and business executives in Latin America’s biggest economy.

The arrest threatened to tarnish the legacy of Brazil’s most powerful politician and the tactics that his left-leaning Workers’ Party used to consolidate its position since rising to power 13 years ago.

Police, who arrested Lula at his home in Sao Bernardo do Campo on the outskirts of Sao Paulo, said they had evidence that he received illicit benefits from kickbacks at state oil firm Petroleo Brasileiro SA in the form of payments and luxury real estate.

The evidence against Lula brought the corruption investigation closer to his protegee and successor, President Dilma Rousseff, who is fighting off impeachment over an unrelated issue and who is struggling to pull the country out of its worst economic downturn in decades.

Lula’s detention sparked a rally in Brazilian assets as traders bet that the political upheaval could empower a more market-friendly coalition.

“Ex-president Lula, besides being party leader, was the one ultimately responsible for the decision on who would be the directors at Petrobras and was one of the main beneficiaries of these crimes,” police said.

“There is evidence that the crimes enriched him and financed electoral campaigns and the treasury of his political group.”

A spokesperson for Lula did not immediately respond to requests for comment.

Lula’s foundation said his detention was “an aggression against the rule of law and Brazilian society”.

The foundation, which has consistently denied any wrongdoing by Lula, called his arrest “arbitrary, illegal and unjustifiable”.

Rousseff has also repeatedly denied any wrongdoing.

Workers’ Party leaders jumped to the former president’s defence, and the Labour Minister Miguel Rossetto said the detention was “a clear attack on what Lula represents. This is not justice, this is violence,” he said in a public statement.

In the street outside Lula’s home, television showed his supporters clad in red shirts exchanged chants, insults, and even blows with opponents, underscoring the deep political passions surrounding the former president.