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SAO PAULO — Brazilian police arrested a prominent banker and the former mayor of Sao Paulo among others in raids on Tuesday that put the spotlight back on a bribery scandal that rocked the government in 2005.
Banker Daniel Dantas, the head of the Opportunity financial group, was arrested on charges of money laundering and tax evasion related to the "monthly allowance" scandal that hit President Luiz Inacio Lula da Silva's first administration, federal police said.
Investor Naji Nahas and former Sao Paulo Mayor Celso Pitta were also arrested for involvement in mR. Dantas' suspected ring, which focused on diverting public funds, police said.
The federal police said 300 officers took part in the operation in Rio de Janeiro, Sao Paulo, the capital Brasilia and in the northeastern city of Salvador. They had 56 search warrants and 24 arrest warrants as part of the probe.
A spokesman for the federal police said Mr. Dantas was the head of "a criminal organization involved in various crimes and which had front companies for diverting public funds."
Lebanon-born Nahas was additionally accused of running a money laundering operation that used the black market in foreign exchange, the police said in a statement.
Mr. Nahas received a prison term for illegal financial trades that led to brokerage collapses and a stock market slump in 1989. He was later absolved but remains a controversial figure in the Brazilian financial world.
Mr. Pitta was Sao Paulo mayor from 1997 to 2000 in an administration dogged by corruption allegations.
Mr. Dantas, who was arrested in Rio, is head of the Opportunity group that used to control phone company Brasil Telecom with Citigroup and Telecom Italia.
Mr. Dantas was a rising star in Brazil's business world as fund manager for Citigroup and a key figure in the privatization of the telecoms sector in the late 1990s.
In 2005, he was indicted for suspected involvement in corporate espionage on firms including Telecom Italia. Police in Rio also took documents from Telecom Italia's office in Tuesday's raids.
Two years ago, Mr. Dantas told the Brazilian Senate that he had been approached by the former treasurer of Lula's Workers' Party and asked to donate $50 million to the party.
Mr. Dantas' lawyer Nelio Machado told Globo TV on Tuesday that the arrest of his client was unnecessary and premature.
In the "mensalao," or monthly allowance, scandal, the opposition alleged that undeclared campaign funds were used to buy votes in support of government proposals in Congress.
The scandal forced Jose Dirceu, Lula's powerful cabinet chief at the time, to resign, although he denied any wrongdoing. It also sullied the reputation of the Workers' Party, which had long portrayed itself as a bastion of ethics in the otherwise murky world of Brazilian politics.
Forty former government allies are still on trial over the scheme, which was never directly linked to Lula, Brazil's first working-class president who is now midway through his second term.
