Brazil judge orders corruption probe into a third of Temer's cabinet

A Supreme Court justice dealt President Michel Temer and Brazil's political elite a heavy blow on Tuesday by ordering investigations into eight cabinet ministers and dozens of lawmakers allegedly linked to the country's biggest corruption scandal.

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The list of names under investigation released by Justice Edson Fachin read like a Who's Who of Brazilian politics, tarnishing past statesmen and potential presidential candidates alike.

The list, whose contents had been subject to furious speculation and a number of leaks, became public when Fachin lifted the seal on plea bargain testimony from 77 employees of construction company Odebrecht [ODBES.UL], which has admitted paying millions of dollars in bribes.

In Sao Paulo, residents banged pots and pans in protest against political corruption, while in the capital Brasilia deputies left a session in the lower house earlier in the day as news of the list began to break.

The investigation into eight ministers, or nearly a third of the president's cabinet, poses a serious threat to Temer's efforts to pass austerity reforms that he says are needed to regain investor confidence and lift the economy out of its worst recession on record.

Temer's office declined to comment.

"More than having eight ministers on the list, the biggest problem for the government is seeing its whole political nucleus there," said Danilo Gennari, partner with Brasilia-based consultancy Distrito Relações Governamentais, referring to the implication of key government allies.

Among that core is Temer's chief of staff Eliseu Padilha, an experienced politician considered key in negotiations with Congress to pass the administration's crucial pension reform.

Padilha said he will defend himself in court.

RISK OF INSTITUTIONAL PARALYSIS

Temer's ministers of foreign affairs, trade and agriculture also are under investigation, as well as the heads of both houses of Brazil's Congress and former presidents Fernando Henrique Cardoso, Luiz Inacio Lula da Silva and Dilma Rousseff.

"The political crisis will deepen and we risk an institutional paralysis because the entire Brazilian political system is under question," opposition senator Jorge Viana, who is under investigation himself, said in a statement.

It also throws into doubt the credibility of a number of potential presidential candidates for elections in 2018, with some of the most commonly mentioned names under investigation. PSDB party leader Aecio Neves and former Foreign Minister Jose Serra are cited on Fachin's list, with a possible investigation of Sao Paulo Governor Geraldo Alckmin referred to a lower court.

Temer has vowed to suspend ministers who are charged and dismiss any if indicted.

Aides close to Temer have told Reuters that it could take months for ministers to be charged, meaning Padilha and other key cabinet members likely will stay in their posts long enough to secure the pension reform's passage.

Tuesday's decision to make public the names targeted in the investigation goes back to March, when Brazil's top public prosecutor asked the Supreme Court to open 83 investigations into senior politicians based on the Odebrecht employees' testimony.

Local media have reported the testimony accuses dozens of politicians of taking bribes to help what was once Latin America's biggest builder win lucrative contracts with state-run oil company Petrobras.

Rodrigo Maia, the head of the Chamber of Deputies, said his innocence will be proved during the investigation. Other politicians also insisted they were innocent and discredited the testimonies.