Brazil top prosecutor says Petrobras management should go

BRASILIA (Reuters) - Brazil's prosecutor-general Rodrigo Janot on Tuesday called for the replacement of state-controlled oil company PETROBRAS (APBR.82)(PETR3.BR)(XPBR.MC)(APBR.82)(PETR4.83)(PETR3.BR) top management and punishment of everyone involved in a scheme to funnel kickbacks from contracts to politicians.

Janot made his strongest comments so far on Brazil's latest corruption scandal as federal prosecutors prepared to indict 11 executives at six of Brazil's largest civil construction firms for a multibillion-dollar bribe and money-laundering scandal.

Two former Petrobras directors are among two dozen people arrested in connection with an alleged scheme to skim money from overpriced contracts into the coffers of President Dilma Rousseff's Workers' Party and ruling coalition.

"Given the disastrous management of the company, Brazilian society expects the most complete and profound investigation of illegal acts, and the punishment of all, all those involved," Janot said at an international meeting on fighting corruption.

Janot said Petrobras, Brazil's largest state-controlled company, must be carefully scrutinized and its operations made more transparent. He said he expects "appropriate reforms, including the eventual replacement of the company's management."

Federal police estimate that the alleged scheme skimmed more than 10 billion reais from Petrobras contracts. Brazilian authorities are seeking to recover millions of dollars they have traced to Swiss bank accounts.

The Rousseff administration said there was no reason for management at the company to quit. It said anyone at the company found guilty of corruption would be fired and put on trial.

"There is absolutely no evidence or suspicion of involvement" by Chief Executive Officer Maria das Graças Foster and her vice presidents, Justice Minister Jose Eduardo Cardozo told reporters.

Janot said Brazilian prosecutors will travel to the United States in January to cooperate with investigations by the Securities and Exchange Commission and the Department of Justice into whether the corruption scheme hurt the interests if U.S. investors in Petrobras shares listed in New York.

Petrobras, formally known as Petróleo Brasileiro SA , faces a class-action lawsuit filed on Monday in a U.S. federal court in New York over the alleged bribery and kickback scheme and contract fixing that lawyers say inflated the value of the company's assets.

Petrobras shares extended nine-year lows in midday trading on the Sao Paulo stock market. The company's preferred shares, its most-traded stock, fell 4.7 percent to 10.96 reais, but later recovered to close at 11.36 reais.

(Reporting by Anthony Boadle; Editing by Guillermo Parra-Bernal and David Gregorio)

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