Brazil’s Meirelles May Face High Court Tax Probe

Brazil’s Prosecutor General asked the Supreme Court to pursue an investigation into alleged tax crimes by central bank President Henrique Meirelles, which analysts say may pose an obstacle to a possible run for elected office this year.

The request made March 5 is contained in a 105-page sealed document, according to the entry in the court’s docket. Justice Joaquim Barbosa was assigned to be the investigating magistrate.

Meirelles, 64, denied any wrongdoing today in a statement on the central bank’s Web site. He received the news about the investigation with “serenity” and formally asked the Supreme Court for access to the files on his case, the statement said.

“The central bank president clarifies that the assets he acquired during his professional life were a result of hard work, with all his income and assets declared to the appropriate authorities, in line with legislation,” the statement said.

Meirelles is facing an April 2 deadline to decide whether to resign his post to become eligible to run in October elections. Earlier this year, he joined the pro-government Brazilian Democratic Movement Party. He hasn’t stated whether he plans to seek elected office.

“This is certainly a hurdle for Meirelles’s political plans,” said Andre Cesar, partner at CAC Consultoria, a Brasilia-based political risk consulting company. “At this point, the probe doesn’t seem enough to make him change his plans, but we need to watch closely how this evolves in the next few weeks.”

President Luiz Inacio Lula da Silva wants Meirelles to serve as Cabinet Chief Dilma Rousseff’s running mate in the October presidential vote, IstoE magazine reported March 9.

Economic Advisor

Agencia Estado, citing people close to the presidency it didn’t identify, reported yesterday that Meirelles is likely to run for the Senate from his home state of Goias.

Government reports today showing a record monthly jump in retail sales and the fastest quarterly economic growth in two years boosted speculation that the Meirelles-led central bank will raise rates next week. The yields on interest rate future contracts maturing through January 2012 rose.

Should Meirelles run for congress, he could be nominated as finance minister if Rousseff wins the election, Cesar said.

The central bank governor, former Finance Minister Antonio Palocci, and former Economy Minister Delfim Netto will be the main economic advisors in Rousseff’s campaign, Cesar said.

Previous Probe

Lula invited Meirelles to join his Cabinet in 2004, after Sao Paulo-based IstoE published allegations that the former head of global banking at FleetBoston Financial Corp. underreported the value of assets abroad and made illegal money transfers. As a member of Lula’s Cabinet, Meirelles can only be tried by the Supreme Court.

In 2005, public prosecutors asked the Supreme Court to try Meirelles for tax evasion, a probe that was shelved in 2007.

On the statement posted on the central bank’s Web Site, Meirelles said he has been “extensively investigated” in the past and that all charges against him have been dropped.

Brazil’s former Justice Minister Marcio Thomaz Bastos is representing Meirelles, according to the Supreme Court’s docket.