Brazilian billionaire arrested for corruption

One of Brazil’s richest businessmen and a top senator have been arrested as part of the sweeping corruption probe into state oil giant Petrobras. Documents supposedly connected to the Brazilian Petrobras scandal were also seized from his home and investment bank Grupo BTG Pactual. Congress suspended its sessions as senators met to discuss how to handle the arrest.

According to the Brazilian media, police claimed the politician was detained because he was obstructing the course of an investigation. Under Brazil’s constitution, the Senate can approve or overturn the Supreme Court decision to arrest a senator.

More than 110 people have already been arrested, including former executives at Petrobras and at Odebrecht SA, Brazil’s biggest construction conglomerate. Last night the corruption scandal took a new turn with the arrest of billionaire banker Andre Esteves and another of Rousseff’s close cadres, leader of the government coalition in Parliament, Delcidio Amaral.

Ratings agency Moody’s Investors Service warned the credit rating of BTG Pactual could be at risk if Esteves’ absence from the helm is prolonged. Their detention, over accusations that they were obstructing the Petrobras probe, heightens the scope and the stakes of the blockbuster investigation that has locked the country into a political and economic crisis this year.

While Brazil’s stocks and currency have seen some stability in the past few weeks, Wednesday’s events have posted what was to be the worst drop among major markets.

Brazil’s central bank said in a press statement that it was monitoring the arrest of Esteves, adding that BTG Pactual has solid liquidity indicators and continues to operate normally.

According to an old Bloomberg profile of Esteves, having disrupted an entrenched industry dominated by old-line banking dynasties, traditional banks and foreign lenders, Esteves became a billionaire before turning 40, then joked that his firm would become “better than Goldman”, a play on the companys name. Castro said Esteves doesn’t even know Nestor Cervero.

In the past, Esteves was involved in dealings with Petrobras, one of which is Sete Brasil.

The moves highlighted investors’ concerns whether Latin America’s largest independent investment bank can thrive without savvy founder André Esteves, Brazil’s most influential dealmaker. BTG teamed up with Petrobras and other partners in 2010 to create the rig-supplier whose former operating chief admitted in plea bargains to crimes of corruption.