Brazil Supreme Court opens government bribery trial

BRASILIA, Aug 24 (Reuters) Brazil's Supreme Court voted today to put on trial the first of 40 people accused of operating an illegal fund-raising scheme by President Luiz Inacio Lula da Silva's ruling party and allies in Congress.

The ruling is likely to fuel opposition attempts to reignite a scandal that broke in 2005 and paralyzed the government and Congress for more than a year.

Lula's ruling Workers' Party, or PT, then admitted using illicit funds to finance election campaigns of its members and allies in Congress between 2002 and 2004. The opposition said the funds were used to bribe legislators.

The chief public prosecutor, Antonio Fernando de Souza, accused PT leaders, bankers, and publicists of forming a ''criminal organization'' that used public and private funds to obtain political favors.

The Supreme court accepted today the prosecutor's indictment of the PT's Joao Paulo Cunha, former president of the lower house of Congress, as well as publicist and mastermind of the scheme, Marcos Valerio Fernandes de Souza.

Its judges also decided to put on trial Lula's long-time friend and former communications minister, Luiz Gushiken, on charges of embezzlement.

Lula's former chief of staff Jose Dirceu and former PT president Jose Genoino were absolved of embezzlement charges but face other accusations the court has yet to consider.

The judges also accepted indictments against four directors of Banco Rural, a small private bank, of making fraudulent loans to PT officials.

Lula has been haunted by a series of corruption scandals in the past three years despite pledges to clean up politics when he first came to power in January 2003.

His energy minister resigned in May over accusations that he took a kickback, and Senate leader Renan Calheiros, from the largest party in his coalition, faces similar charges.

Brazil's Roman Catholic bishops said this week that the corruption scandals and impunity for politicians have undermined faith in Brazil's institutions and democracy.

Few politicians accused of corruption spend time in jail in Brazil. Some are absolved and many manage to stall lawsuits in a notoriously slow judicial system.

REUTERS AK BST0305