Brazil's president publicly apologized for the corruption scandal that has plagued his ruling Workers Party but denied any involvement, saying in a nationally televised address that he had been "betrayed."
President Luiz Inacio Lula da Silva on Friday promised to crack down on anyone implicated in wrongdoing in the Workers Party, which was previously famed for its ethics but is now under siege for a bribes-for-votes scheme and other accusations of financial wrongdoing.
The scandal, ongoing for months, edged closer to the popular leftist president on Thursday when Silva's campaign manager told congressional investigators that he was paid for his work in the 2002 elections with undeclared funds from offshore accounts.
"I am fully aware of the seriousness of the political crisis," Silva said in the address, which came before the start of a Cabinet meeting on Friday.
"I feel betrayed by the unacceptable practices of which I never had any knowledge," he said.
Duda Mendonca, who engineered Silva's successful 2002 campaign, said that the Workers Party, or PT, financed election campaigns with funds that were not declared to electoral and tax officials.
He said Silva was not involved or even aware of the practice and that Silva's campaign was legitimately funded. The PT has already been accused of bribing lawmakers for their support.
Mendonca said he received bundles of cash from Marcos Valerio, a businessman accused of running a bribes-for-vote scheme Silva's party allegedly used to ensure legislation would be passed in Congress.
"I'm no fool," Mendonca said. "We knew it was undeclared money, but we had no choice. Either we took it or we didn't get paid."
Brazil's markets slid early in the day, but ended up 1.2 percent over on Thursday. The Brazilian real continued to weaken, losing 1.2 percent against the dollar
Silva, a former labor leader, said he ordered federal police to thoroughly investigate and to "spare no one, be they of the Workers' Party, of an allied party or of the opposition."
"I feel no shame in apologizing to the Brazilian people," he said at the end of his 10-minute speech. "The Workers' Party must apologize and the government has to apologize for whatever errors it may have committed."
Analysts said Silva had little choice but to speak out if he wants to salvage his re-election chances next year, or to even avoid impeachment.
The national news weekly Epoca published an interview on Friday with Waldemar Costa Neto, president of the PT-allied Liberal Party, who said for the first time that Silva knew of the financing practices. In the interview, Costa Neto said he negotiated a payment of US$4.2 million with Workers Party officials, while Silva and his running-mate Vice-President Jose Alencar sat in an adjacent room.
On Aug. 1, Costa Neto became the first lawmaker to step down in the widening corruption scandal.
On Friday evening the president's office issued a statement denying the report. The statement said that while Silva and Alencar participated in political discussions to form a governing coalition, all other issues were left to officials within the allied parties.
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