Brazil arrests former BRB head in Banco Master probe, sources say

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By Lisandra Paraguassu, Ricardo Brito and Rodrigo Viga GaierBrazil's federal police on Thursday arrested Paulo Henrique Costa, the former head of lender BRB BMFBOVESPA:BSLI3, in a probe linked to lender Banco Master, two sources close to the investigation told Reuters.The arrest marks the latest escalation in a probe into alleged corruption tied to the now-defunct Banco Master, whose collapse last year rattled Brazil's financial sector and drew scrutiny over its ties to state-controlled lender BRB.In remarks to journalists in Brasilia, Costa's lawyer Cleber Lopes said the defense remains firm in its belief that his client did not commit any crime. Costa did not immediately respond to a Reuters' request for comment.The arrest followed a decision by Supreme Court Justice Andre Mendonca, who cited evidence of an "illicit scheme designed to enable the fabrication, sale, and transfer of fictitious credit portfolios from Banco Master to BRB."The decision also cited evidence that Costa received bribes worth an estimated 146.5 million reais ($29.34 million) in real estate from Banco Master owner Daniel Vorcaro, with payments exceeding 74 million reais already tracked.The full payment of the amounts agreed upon between Vorcaro and Costa was not completed only because the banker became aware of a confidential procedure to investigate the payment of bribes, according to the Supreme Court ruling citing the federal police investigation.BRB, which is controlled by the Federal District government, had planned to acquire Banco Master last year, but the central bank blocked the deal in September.The Supreme Court ruling also requested the arrest of lawyer Daniel Monteiro, who is linked to Vorcaro, pointing to his role as "a key agent in the legal aspect of the criminal structure" of the transactions between Master and BRB. A source confirmed his arrest on Thursday.The sources requested anonymity as the investigation is being conducted under confidentiality.In a statement that did not name suspects, federal police said they carried out a new phase of Operation Compliance Zero to investigate a money-laundering scheme involving the payment of undue advantages allegedly intended for public officials.The statement said crimes of corruption, money laundering, financial crimes, and organized crime are being investigated, but did not specify the charges being brought against thos...

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