Brazil Police Arrest Three Ex-Congressmen, Broaden Corruption Probe

(Reuters) - Brazilian police arrested three former congressmen on Friday, broadening their corruption investigation beyond state-run oil firm Petrobras to state lender Caixa Economica Federal and the federal health ministry.

A federal judge in the southern city of Curitiba ordered the arrest of André Vargas, ex-congressman for the ruling Workers' Party as well as Luiz Argolo and Pedro Corrêa, former lawmakers for the smaller opposition Party of Solidarity.

Though none currently hold office, they were the first politicians arrested in the year-old probe that discovered engineering and construction companies had funneled bribes from Petrobras.

Police agents and prosecutors said at a press conference that Vargas and his brother had taken bribes in exchange for helping a public relations firm and a biotech lab secure contracts with Caixa Economica Federal and the health ministry.

"This was probably repeated in other areas," said federal police agent Igor Romario.

Federal judge Sergio Moro wrote in dispatches ordering the arrests that the investigation would need to be deepened but evidence suggested crimes of corruption and money laundering had been committed.

Four other people were arrested for their alleged role in funneling bribes.

Prosecutors have warned since last year that the multibillion-dollar kickback scheme they uncovered at Petroleo Brasileiro SA, as the oil company is formally known, likely extended to other state-run companies.

The investigation dubbed "Operation Car Wash" has led to the indictment of scores of executives from Brazil's top builders and implicated dozens of politicians, the majority of them from President Dilma Rousseff's Workers' Party, who allegedly received graft money.

It has shaken Rousseff's government and threatens to further slow a stagnant economy, excluding the country's top engineering firms from contracts with Petrobras.

The congressmen and Caixa Economica are tied to the Petrobras investigation by Alberto Youssef, the black-market money changer in Moro's state of Parana who agreed to reveal beneficiaries of the scheme in exchange for a lighter sentence.

"The investigation is only beginning," prosecutor Carlos Fernando dos Santos Lima said on Friday.

Caixa Economica said in an emailed statement that it would open an internal inquiry and will collaborate fully with the investigations, forwarding all contracts related to the allegations to the authorities.

Representatives for the former congressmen could not immediately be reached.

(Reporting by Sergio Spagnuolo; Writing by Caroline Stauffer and Stephen Eisenhammer; Editing by W Simon)