Brazil’s biggest ever corruption scandal claimed its most prominent victim on Wednesday when the chief executive of state oil giant, Petrobras resigned along with five senior directors.

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Maria das Graças Foster, who was hand-picked by President Dilma Rousseff to run the country’s most powerful company, was forced to step down after a widening investigation discovered 23bn reais ($8.9bn) of suspect payments, bribes and kickbacks to politicians.

The fall of such a key ally adds to the growing pressure on Rousseff, who is already struggling with a moribund economy, the worst drought in living memory and allegations that her party and allies were effectively using Petrobras as an ATM for their campaigns.

Foster – an engineer who rose through the ranks to be the company’s first female CEO – is not accused of wrongdoing, but she is accused of ignoring tip-offs about the money being creamed off of contracts for executives and politicians.

In recent months, she has faced repeated calls for her resignation as the scale of the corruption scandal has become apparent and the Petrobras share price has plunged 70% since its September peak.

Rousseff – who regularly invited Foster to the presidential palace – is reported to have decided last week that she could no longer protect her friend after the company had to delay the release of audited financial results because of uncertainty about the amount of write-offs for graft-related costs. The company’s external auditor PwC has refused to sign the accounts because of the lack of clarity.

Analysts said the resignation was overdue.

“Everyone knows the only reason she didn’t leave earlier was because of the stubbornness of Dilma and because last year was an election year,” said Adriano Pires from the Brazilian Infrastructure Centre.

He said the government, which has long meddled in the management of Petrobras, now needed to let the company make a fresh start.



If the government lets the new board have more autonomy, Petrobras has everything it needs to recover … But if the government does not acknowledge that everything has to change, then there really is no way out for Petrobras.”

Petrobras confirmed Foster’s departure in a terse one-line statement on Wednesday announcing a meeting of the board of directors on Friday “due to the resignation of the president [chief executive] and the five directors”.

They will have their work cut out trying to restore the reputation of a company that, until last year, Brazilians considered one of two national treasures along with the Seleção national football team.

But its business and image have been hit by falling oil prices, which has made it almost uneconomical to drill for their deepwater reserves, arrests, and a barrage of lawsuits from US investors over the scandal.

The corruption investigation, which police have named Lava Jato (Car Wash), has revealed massive illicit payments from contractors to Petrobras directors. Many millions of dollars were channeled to the ruling Workers Party and its allies in congress.

Two former executives were arrested last year including the former head of refining, Paulo Roberto Costa, who has since turned state witness. With the scandal still widening, further high-profile arrests are expected in the political world and construction industry.

Rousseff, who was Petrobras chairman while much of the wrongdoing was taking place, is also under scrutiny. She has denied knowledge of the kickback scheme.

The president is likely to miss the support of Foster, who has reportedly been a personal friend since the two worked together at the ministry of mines and energy in 2003. After appointing Foster as head of Petrobras in 2012, Rousseff met with her frequently at the presidential palace in Brasilia.



Foster told reporters in December she offered to resign three times after the auditors first refused to sign off on the company’s accounts, but she agreed to stay in the job as long as the president trusted her.

Independent investigators hired by the company took her laptop and phone for examination before Christmas.

“This is good for the company,” Foster said at the time. “We aren’t afraid of the truth.”