SAO PAULO/BRASILIA (Reuters) - Brazil’s top court released plea-bargain testimony on Friday accusing President Michel Temer and his two predecessors of receiving millions of dollars in bribes, the most damaging development yet in a historic political corruption probe.

Brazil's President Michel Temer reacts as he speaks at the Planalto Palace in Brasilia, Brazil, May 18, 2017. REUTERS/Ueslei Marcelino

The testimony made public by the Supreme Court is from executives of the world’s largest meatpacking company, and raises serious doubts about whether Temer can maintain his grip on the presidency.

The scandals that have engulfed Brazil’s political class and many business elites reduce the chances that Temer, a conservative who took office after leftist former President Dilma Rousseff was impeached last year, can push through economic reforms crucial for Latin America’s biggest country to recover from its worst recession on record.

The Supreme Court on Thursday said it approved an investigation of Temer for corruption and obstruction of justice. Calls for his resignation intensified, including an editorial in the O Globo newspaper, which is normally criticized by leftists for backing conservative politicians.

“This is easily the worst moment in Brazil since we returned to democracy,” said Claudio Couto, a political scientist at the Getulio Vargas Foundation, a top university, calling the claims “the mother of all plea bargains.”

“This testimony is hitting everyone, all the major political players and, most importantly, a sitting president,” he added.

The revelations came from testimony given by executives at JBS SA (JBSS3.SA). Once a small meat producer, JBS grew exponentially during 13 years of government by former President Luiz Inacio Lula da Silva and Rousseff’s Workers Party, primarily through acquisitions funded by low-cost loans from Brazil’s development bank.

The JBS executives said they made about 500 million reais ($154 million) in illegal payments to politicians and bureaucrats in recent years in exchange for winning contracts, getting easy credit from state-run banks and resolving tax and other disputes with the government.

Temer’s office denied in a statement that he obstructed justice by interfering in the probe and also denied accusations he took bribes. Lawyers for Lula said he was innocent. Rousseff denied any wrongdoing in a statement.

In addition to the three presidents, congressmen, ministers and several governors and mayors of major cities were named in the testimony. It implicates ruling and opposition parties alike.

According to the testimony, JBS paid Temer 15 million reais ($4.6 million) in bribes. It also alleges that Lula, who is already facing five corruption trials, received $50 million in bribes in offshore accounts from JBS, while Rousseff took $30 million in bribes, also in offshore accounts.

The corruption scandals that have polarized Brazil center on political kickbacks in exchange for firms winning contracts at state-run enterprises, especially at oil company Petrobras (PETR4.SA).

Related Coverage Brazil watchdog opens new probes into JBS-related insider trading

They have led to over 90 convictions of businessmen and politicians and prompted the investigation of dozens of sitting congressmen and a third of Temer’s cabinet.

Supreme Court Justice Edson Fachin wrote this week that an immediate investigation into Temer was required because the alleged criminal practices “are underway or about to occur.”

Temer on Thursday, in a terse address, said he would not resign from the presidency.

His defiance came as the Supreme Court released an audio tape of him speaking with JBS Chairman Joesley Batista.

In the recording, secretly made by Batista in a March visit to Temer, the president appeared to condone the payment of hush money to former lower house speaker Eduardo Cunha, who last year orchestrated Rousseff’s impeachment and was later convicted for corruption.

Many politicians fear that if Cunha should turn state’s witness, his testimony could implicate scores of congressmen and members of the executive branch.

The constant march of indictments and new scandals has led to near paralysis in Brasilia, the capital, and led to widespread calls among Brazilians for new elections.

But new elections would require a constitutional amendment.

If Temer resigns or is forced from office, the constitution at present says Congress must choose a caretaker president and vice president to govern until the next election, scheduled for late next year.

The JBS testimony also tainted one other prominent politician - Aecio Neves, a senator. Suspended from the chamber in the wake of the allegations, Neves led the chief opposition to Workers Party governments and placed a close second behind Rousseff in 2014 presidential elections.

Executives said JBS had paid Neves 80 million reais in illegal funding for that campaign as well as 2 million recently to support a new “abuse of authority” law that seeks to make it easier for suspects and defendants to sue investigators, prosecutors and judges.

The measure, which passed the Senate last month, must still be approved by the lower house. It has been sharply criticized by those leading Brazil’s crackdown on corruption.

Slideshow (8 Images)

Prosecutors wrote in the document released on Friday that they had proof Neves collaborated with Temer in attempts to slow or halt anti-corruption investigations.

($1 = 3.2560 reais)</s>RIO DE JANEIRO—Fighting to save his job amid a mushrooming corruption scandal, Brazilian President Michel Temer told the nation Saturday that an incriminating audio recording of him had been doctored. “That clandestine recording was manipulated and doctored with (bad) intentions,” Temer said at a news conference in capital of Brasilia. Temer said he had filed a petition with the Supreme Federal Tribunal, the country’s highest court, to suspend the corruption investigation into him until experts can analyze the audio that appears to show him endorse the payment of bribes to ex-House Speaker Eduardo Cunha for his silence. It’s unlikely the court would do that, as it authorized the opening of the investigation into Temer in the first place and ordered it made public. Temer noted that the Folha de S. Paulo newspaper reported that the 39-minute recording had been edited. The audio was first reported by Globo newspaper on Wednesday.

Read more: Brazilian President Michel Temer faces potential ousting as new scandal is revealed Temer also questioned the motives of the man who made the recording, JBS meat packing company executive Joesley Batista. He accused Batista of buying “large quantities of dollars to cause chaos on the exchange market” before giving the tape to prosecutors. Temer’s claims about the audio and Batista couldn’t be immediately verified.

In the audio, Temer apparently endorses bribes for Cunha, who is serving a 15-year prison sentence of corruption and money laundering and who led the impeachment push against President Dilma Rousseff last year. Rousseff was eventually ousted for illegally managing the federal budget, bringing Temer, who was her vice-president, to power. Temer’s remarks were unlikely to have much impact on the spreading movement for him to resign. Even if the audio was edited, Temer’s words to Batista to keep up the payments to Cunha seem clear. And Temer did not mention the long list of other allegations against him, nor acknowledge that allies have started to bolt. Soon before Temer spoke, the Brazilian Socialist Party announced it was breaking from his coalition. The loss of its seven senators and 35 deputies mean Temer’s ambitious plans to reform the country’s pension system and labour laws are even less likely. The leaders of several other parties in Temer’s coalition also planned to consult with their members Saturday in Brasilia.

Brazil’s highest court released documents on Friday revealing that the nation’s top prosecutor is accusing Temer of corruption, obstruction of justice and being part of a criminal organization. In one plea bargain released as part of the tribunal’s document dump, Temer is accused of taking $1.5 million in bribes. In another, Temer is accused of pocking about $350,000 of $4.5 million in illegal campaign finance channelled by the Workers’ Party for the 2014 presidential ticket that included Temer as vice-presidential candidate. The calls for Temer to resign have been joined by Globo, the flagship paper of Brazil’s biggest media company, which had been supporting the president’s legislative program to boost an economy mired in its worst recession in decades. The company generally wields enormous influence among Brazilians because of its popular soap operas and media dominance. “The president has lost the moral, ethical, political and administrative conditions to continue governing Brazil,” O Globo said in an editorial. Attorney General Rodrigo Janot’s formal presentation of evidence was an extraordinary development in a corruption probe that is upending politics and just about everything else in Latin America’s largest nation. Janot accused Temer and Sen. Aecio Neves of trying to derail the three-year-old “Car Wash” investigation into a huge kickback scheme at the state-run oil company Petrobras via legislative means and by influencing police investigators. Because the case involves a sitting president, the process is different than in any other kind of criminal case. With a formal investigation now opened, Janot’s will now decide whether his case is strong enough to send it for consideration by the Chamber of Deputies in Congress. If at least two-thirds of the members of the lower house voted in favour, the case would be sent back to the top court, which would then decide whether to put Temer on trial. If the court decided to try Temer, he would be suspended from office for up to 180 days. A conviction would permanently remove him from office. At least eight pieces of proposed legislation to impeach Temer have been submitted in Congress.</s>Brazil's top prosecutor is accusing President Michel Temer of corruption and obstruction of justice, according to an investigation released Friday by the supreme court, dramatically escalating pressure to force the embattled leader from office.

At the same time, other released documents said the owner of a major meatpacker has told prosecutors that he transferred $150 million to offshore accounts for the campaigns of Temer's two predecessors in the presidency.

Attorney General Rodrigo Janot's charges against Temer threaten to drive him from the presidency and represent an extraordinary development in a corruption probe that is upending politics and just about everything else in Latin America's largest nation.

For Temer, a 76-year-old career politician who was not elected, the fallout could cost him his job. Temer, then vice president, took power a year ago after President Dilma Rousseff was impeached and later removed from office for illegally managing the federal budget.

By Friday afternoon, O Globo, the flagship paper of Brazil's largest media company, was calling for Temer's resignation, delivering a significant blow to Temer's prospects for survival. The media group had supported Temer's proposed economic overhaul, and more generally wields enormous influence because of its popular soap operas and media dominance.

The attorney general's formal presentation of evidence is the latest revelation related to a secretly recorded audio that purportedly captured Temer endorsing the paying of hush money to an ex-lawmaker now serving a 15-year prison sentence for corruption. The audio was first reported by O Globo on Wednesday night and has been rocking the country ever since.

In a plea bargain that was part of the documents released Friday by the Supreme Federal Tribunal, the same man who reportedly recorded the president also says he paid $1.5 million in bribes to Temer.

Janot says Temer and Sen. Aecio Neves have tried to derail the three-year-old "Car Wash" investigation into a huge kickback scheme at the state-run oil company Petrobras via legislative means and by influencing police investigators.

"In this way, there is evidence of possibly committing the crime of obstructing justice," Janot wrote.

Because the case involves a sitting president, the process is different than in any other kind of criminal case. With a formal investigation now opened, Janot's next step will be to decide whether his case is strong enough to send it for consideration by the lower Chamber of Deputies in Congress.

If at least two-thirds of the members of the lower house voted in favor, the case would be sent back to the top court, which would then decide whether to put Temer on trial. If the court decided to try Temer, he would be suspended from office for up to 180 days. A conviction would permanently remove him from office.

At least eight pieces of proposed legislation to impeach Temer have been submitted in Congress, and a stream of people from many walks of life has been calling for him to step down.

On Friday, former Chief Justice Joaquim Barbosa added his voice.

"There is not another way out: Brazilians must organize, go to the streets and demand with strength the immediate resignation of Michel Temer," Barbosa Tweeted.

Temer's administration began questioning both the legality and content of the recording first reported by O Globo.

"President Michel Temer does not believe in the veracity of the declarations" in the recording, according to a statement from his office.

The statement also noted that the person who made the recording, JBS meat-packing company executive Joesley Batista, is under investigation himself and thus was "taking advantage" of the situation. The recording was turned over to prosecutors as part of a Batista plea bargain.

In the documents released Friday, Batista also said his company paid Temer about $1.5 million from 2010 to 2017. Some of those funds were disguised as legal campaign donations and others were channeled to Temer's public image consultant Elsinho Mouco, Batista said.

Attempts to locate Mouco for comment were not successful. The presidency also didn't immediately respond to queries seeking comment about the latest revelations.

In Batista's plea bargain, he also told authorities that he transferred $150 million to offshore bank accounts for campaigns of President Luiz Inacio Lula da Silva and his successor in the presidency, Dilma Rousseff.

Batista said former finance minister Guido Mantega was the middle man in the operation. He also said both former presidents were aware of the transfers, but did not say where the accounts were based. Batista also didn't say for which campaigns the money was transferred.

Rousseff denied the accusations in a statement and said she never had offshore bank accounts. Silva's spokesman said Batista's accusations are hearsay that was never investigated.

For Silva, president between 2003 and 2010, the accusations add to a long list of corruption cases against him, which may ultimately keep him from running for the presidency in 2018.

The sprawling "Car Wash" probe has already put dozens of Brazil's top businessmen and politicians in prison. Many more are being investigated.

After the O Globo report on Temer, Brazil's highest court opened an investigation into the accusation late Thursday and lifted the seal on the nearly 39-minute recording, which is scratchy and often inaudible.

In it, two men can be heard talking about former Lower House Speaker Eduardo Cunha, now serving a 15-year prison sentence for corruption and money laundering. Globo's report identified the men as Temer and Batista.

One man, apparently Temer, complains that Cunha could potentially embarrass him.

"Within my limits, I did the most I could there. I settled everything," responds the other man, apparently Batista. "He came and collected, etc., etc., etc. I am good with Eduardo, OK?"

The first man then says: "You have to keep that up, see?" To which the second man responds: "Every month."

In a national address Thursday, Temer emphatically denied that he had authorized any bribes and defiantly vowed to continue in office.

His short speech did little to calm nerves during a volatile day that saw a 10 percent drop in Brazil's stock market and an 8 percent drop in the real against the U.S. dollar. By late Friday, the real had risen 3 percent and stocks were up nearly 2 percent in the Ibovespa exchange.</s>BRASILIA, BRAZIL—Brazil’s government plunged into crisis on Thursday, after a newspaper report alleged that President Michel Temer had condoned a bribe to a politician to keep him from testifying on corruption. The news stunned South America’s biggest country, coming less than a year after its last leader was impeached. Temer denied guilt, but both his rivals and some of his supporters called for him to step down. Opposition senators formally requested his impeachment, citing obstruction of justice, and the Supreme Court launched an investigation into the president’s actions. Temer said he would not resign. If he did, a new president would be elected through a secret vote in Congress to serve out the rest of Temer’s term, through 2018. This could take several months because of the complex legislative process and the likelihood of extensive political wheeling and dealing. The speaker of the house would step in temporarily, until a new leader was elected. Read more: Millions in bribes paid to Brazil president’s party, former exec says The political storm erupted late Wednesday, when the Brazilian newspaper O Globo reported that Temer had been the target of a police sting operation in which he was recorded condoning a payment by a Brazilian businessman to the jailed speaker of the house aimed at ensuring that the politician stayed silent on corruption.

When the executive told Temer that he was paying the former politician a monthly stipend to keep him quiet, the president said, “You need to keep that up, OK?” the newspaper reported, citing the recording. The recording was not made public. While Temer acknowledged having met with the businessman, Joesley Batista, a meat-packing executive, he denied any attempt to silence the former speaker, Eduardo Cunha, who is serving 15 years in prison for corruption. Cunha had been one of the country’s most powerful men and is believed to have compromising information on several top politicians. The presidential palace released a statement saying that Temer “never requested payments to obtain the silence of ex-deputy Eduardo Cunha.” It added that the president “defends a deep and wide investigation to get to the bottom of the claims put forward in the media.”

The police operation was part of a massive investigation into corruption known as Lava Jato, or Operation Car Wash, that has implicated scores of politicians and business executives. Through plea bargains, in which defendants provided prosecutors with information in exchange for more lenient sentences, authorities have been able to trace a major kickback scheme from a Brasilia car wash to the highest echelons of the government. Temer had managed to avoid being tainted by the scandal, going so far as to fire ministers who tried to interfere in the investigation. The news report late Wednesday, however, put in jeopardy the measures Temer had championed to rescue the ailing economy — and raised questions about how long he could stay in power. Scattered protests erupted across the country with both Temer’s rivals and supporters urging him to step down. “The president’s resignation has become imperative to prevent the crisis from worsening,” Carlos Siqueira, president of the Brazilian Socialist Party, a small member of the government coalition, told O Globo. “The Temer government ended today.” Temer, who called an emergency meeting of his supporters after the news broke late Wednesday, was determined not to resign, according to local media. But he may not have a choice. An unpopular president who ascended to the job after Dilma Rousseff was impeached, Temer’s legitimacy rested on his ability to unite Brazil’s three dozen political parties. With his political base divided, many questioned his ability to govern. “Given the gravity of the situation and the responsibility to keep Brazil from plunging into the imponderable, the only option is for President Michel Temer to resign,” said Sen. Ronaldo Caiado, another member of Temer’s coalition in the legislature. Temer’s opponents may have another route to kick him out of office. Rousseff and Temer are on trial in a case separate from the car wash investigation, for allegedly accepting illegal donations as part of their 2014 campaign. If convicted, the pair could see their victory invalidated, forcing Temer to step down. While this possibility was seen as remote when the trial began a few weeks ago, it is now seen as more likely, since Brazilian courts often take their cues from public opinion.</s>BRASILIA, May 20 (Reuters) - Brazilian President Michel Temer on Saturday angrily challenged a recorded conversation implicating him in a corruption probe, saying he would continue as president and ask the Supreme Court to verify the integrity of the recording.

"Brazil will not be derailed," he said during a speech at the presidential palace, reiterating that he would not resign despite an ongoing investigation by the Supreme Court into allegations he took bribes and condoned the payment of hush money to a jailed congressman.

Temer, visibly defiant, said he would ask the court to suspend an investigation against him until it could determine whether the recording, made by the chairman of meatpacker JBS SA during a March conversation, was edited afterwards.

The recording, which some local media have said shows signs of editing, is part of plea-bargain testimony by JBS executives that was disclosed this week.

The disclosure rattled Brazilian financial markets, cost Temer key congressional allies and led to widespread calls for his resignation. It also undermined efforts by Temer to pass economic reforms considered crucial to revive Brazil's economy after its worst recession on record.

The testimony, part of an ongoing string of major probes into corruption at the highest levels of Brazilian government and business, also claimed JBS paid millions in illegal campaign financing to Temer and his predecessors, leftists Dilma Rousseff and Luiz Inácio Lula da Silva.

In his speech Saturday, Temer lashed out at Joesley Batista, the JBS chairman, and other company executives, saying they were angry with his conservative government's austerity plans and efforts to curb the generous public financing of private companies that typified the administrations of his predecessors.

JBS, now the world's largest meat processor, grew rapidly through acquisitions during the Rousseff and Lula governments, mostly because of large, low-cost loans by the national development bank.

Calling their testimony "riddled with lies," Temer said there were inconsistencies in the JBS executives' statements to prosecutors. He also seized upon ongoing investigations by Brazil's securities regulator, known as the CVM, to question their motivations.

On Friday, the CVM said it was probing recent trades in stock and currency markets that earned JBS' controlling shareholders windfalls, even as they were giving plea testimony that would eventually affect the value of JBS stock and Brazil's currency, the real.

Joesley Batista, who was allowed to leave Brazil and return to a Manhattan apartment after his testimony, "speculated against the national currency," Temer said, yet was now "loose and free to walk the streets of New York." (Reporting by Lisandra Paraguassu; Writing by Paulo Prada; Editing by Mary Milliken)</s>Thousands of people took to the streets across Brazil demanding the resignation of President Michel Temer, who is the target of a corruption investigation.

Organised mainly via social media, the largest protests on Thursday took place in Sao Paulo, Rio de Janeiro, and the nation’s capital, Brasilia, Efe news reported.

Besides Temer’s departure, demonstrators also called for early general elections.

The protests materialised hours after Brazil’s Supreme Court authorised an investigation into allegations Temer encouraged the payment of bribes to a former top lawmaker convicted earlier this year of graft.

Justice Edson Fachin, who is overseeing cases related to the investigation of a $2 billion corruption scheme centred on state oil company Petrobras, approved the probe of the president’s conduct.

Temer’s legal troubles are the latest development in the Petrobras investigation, which is known as Lava Jato (Car Wash). A former president, Luiz Inacio Lula da Silva, faces several corruption trials related to the probe.

Temer on Thursday vehemently rejected calls for him to resign from both the opposition and members of his own ruling coalition.

“I won’t resign. I repeat. I won’t resign, and I demand that everything be fully cleared up,” the head of state said in a message to the nation from the Planalto presidential palace.

Under Brazil’s constitution, Temer’s resignation or removal would require Congress to choose someone to serve the balance of ousted President Dilma Rousseff’s 2015-2019 term.

But groups of lawmakers in both chambers have already drafted bills to hold the presidential election this year instead of 2018, as scheduled.

This latest political crisis caused stock prices to plunge – and trading to be temporarily halted at the Sao Paulo Stock Exchange.

The exchange’s benchmark Ibovespa index ended the day down 8.8 per cent, while the value of the Brazilian real against the dollar plunged by nearly 9 per cent.</s>Brasilia — Brazil’s Michel Temer hoped to save his presidency on Friday by persuading the corruption-riddled congress to back him, despite growing calls for his head in the country’s explosive new graft scandal.

His office said he would start the day by meeting his defence minister, Raul Jungmann, and military commanders at the presidential complex.

The agenda appeared to be designed to underline the centre-right president’s insistence on maintaining authority.

On Thursday, Temer emphatically refused to step down after the Supreme Court authorised an investigation against him.

He is accused of having given his blessing to payments meant to keep the former speaker of the lower house, Eduardo Cunha, from spilling secrets while he is in prison for taking millions of dollars in bribes.

The hush money allegations left Temer teetering barely a year after he took power in controversial circumstances, replacing his impeached predecessor, leftist president Dilma Rousseff.

He now faces eight impeachment demands filed in congress and a battle to maintain his ruling coalition. There were protests by several thousand people in Rio de Janeiro and the capital Brasilia that ended in clashes with riot police.

More anti-Temer protests were planned this weekend.

The Supreme Court, which deals with sitting politicians, rarely moves quickly on investigations and suspects often manage to string out their cases.

That leaves impeachment proceedings as the most likely avenue to remove Temer from power, just like a year ago when Rousseff was stripped of her office and Temer, her vice-president, automatically got the top job.

But for that to happen, Temer’s powerful ruling coalition in congress would have to turn on him.

"That’s why today the main question is to know whether the parties that form the government’s base will leave," said Thomaz Pereira, constitutional law professor at the Getulio Vargas Foundation in Rio.

The culture minister, Roberto Freire, resigned on Thursday and Brazil’s media was rife with reports of other ministers threatening to exit. Temer will try to stem the flow, especially with his PMDB party’s main partners, the PSDB.

Ironically, the legislature that now holds Temer’s fate in its hands is itself riddled with corruption scandals.

About two-thirds of legislators have had brushes with the law at some point. And a third of the senate is currently being investigated in the "Operation Car Wash" investigation that has uncovered massive bribery and embezzlement in Brazil’s elite — with Temer’s investigation being just the latest offshoot.

The scandal started with the revelation in O Globo newspaper on Wednesday that Temer had been secretly recorded while talking to Joesley Batista, an executive from the meatpacking giant JBS, on March 7.

On the tape, which was finally made public on Thursday, Batista told Temer that he was paying money every month to Cunha "to keep things under control". Temer replied: "You need to keep doing that, OK?" The conversation, which was provided to prosecutors as part of a plea bargain with Batista, is now in evidence with the Supreme Court. It has been interpreted as referring to bribes given to Cunha to make sure that he does not talk to prosecutors himself.

But in his statement on Thursday, Temer angrily responded: "I never bought anyone’s silence." He also told the nation that his work to push unpopular austerity reforms through congress was just starting to show positive results.

Temer highlighted signs this week that Brazil’s two-year recession was coming to an end and claimed that "optimism was returning". Now "those efforts may come to nothing", he warned.

Investors, who have been betting on Temer achieving his makeover of the battered economy, will be watching for more mayhem on the markets on Friday.

The Sao Paulo stock market reacted in panic on Thursday to the spectre of Brazil losing its second president in just more than 12 months, with trading suspended briefly after the Bovespa index crashed more than 10%.</s>If you want a clue on how to 'drain the swamp', or at the very least, pull the plug and get a whole bunch of politicians circling the drainpipe, look no further than Brazil. In the latest saga of national corruption, president Michel Temer needs a life boat.

It's another familiar story of leaked memos and recorded conversations. This one between Temer and un-named executives of the holding company behind JBS, a multinational meat packer and owner of the Pilgrim's Pride brand out of Greeley, Colorado. In the conversation, Temer supposedly said he was willing to pay hush-money to silence ousted house speaker Eduardo Cunha from testifying against other members of congress, including himself. The recording was given to the Globo newspaper last night.

Brazil's stock market hit an iceberg on the news. The market has sunk to its worse pre-opening since the Great Recession. The iShares MSCI Brazil (EWZ) and Petrobras (PBR) -- the state owned oil company that took center stage in the graft scheme -- are both down by 17%. The Brazilian real went from R$3.13 to R$3.30. Brazil's 2021 bonds have fallen their most in one day, but is still trading at a premium at 102.

Temer took over for his partner, Dilma Rousseff, in August. Dilma was impeached last year in a combination of breaking fiscal responsibility laws and being thrown under the bus by former allies because she could not stop Petrobras investigators from circling the wagons.

For much of the past 14 years, under the guidance of the ruling Workers' Party, Petrobras was used as means to enrich political parties and its allies. Private sector companies, in partnership with the political establishment, paid bribes and were given outrageous public works contracts. These contracts ultimately increased Petrobras' debt (the highest indebted company in Brazil and highest indebted oil company in the Americas with over $120 billion out there) and led to the so-called Car Wash investigation. This investigation has pulled the plug on the Brazilian swamp, even though many locals are still waiting for more political figures to get sucked into the sewer pipes.

The opposition in congress, made up of disgruntled members of the Workers' Party and other left wing groups, called for Temer's impeachment on Thursday.

Last night, some people took to Avenida Paulista in Sao Paulo in support of the latest attack on politicians.

For his part, Temer said that he did indeed meet with JBS executive Joesley Batista, but did not discuss paying for Cunha's silence.

This latest revelation on Temer appears to have everything and nothing to do with an ongoing investigation by the Election Court (TSE) into the 2014 campaign. It is bad optics, but has nothing to do with the 2014 election investigation. Temer and Dilma are being investigated by the TSE for allegedly taking undocumented money from the major Petrobras contractors, namely Odebrecht. Odebrecht executives have been offering up names of politicians in plea bargain deals to get out of long term prison sentences. Some 19 executives have been arrested, including Odebrecht namesake CEO, Marcelo Odebrecht, who is serving a 19 year prison term for his involvement in the graft scheme.

If TSE rules that the campaign was funded illegally, then 2014 election is voided. The House Speaker becomes the unelected president until elections are held in October 2018. It is unlikely that this latest reveal will move the needle on the TSE investigation, but it certainly does not help.

Temer could also step down, which would be similar to TSE forcing him to resign. Some have called for early elections. Brazilians go to the polls in October 2018. Early elections would mean that politicians caught in the Petrobras dragnet but not yet convicted would be allowed to run. A big favorite on this end is ex-president Luiz Inacio Lula da Silva. Odebrecht plea bargains have cited Lula's involvement in the scandal.

As this crisis unfolds, Brazil's reforms are shoved further on the backburner. This changes the fundamental landscape of Brazil, and the investment outlook.

“The consequences for Brazil could be wide-ranging," says Craig Botham, an economist for Schroders in London. "Pension and labor market reforms, the former particularly key, could both be under threat. Temer was already on an average approval rating of 10% and these allegations weaken his position further. Economic confidence had been on the rise in Brazil following the removal of Dilma, and this appeared to have led to a tentative recovery in economic activity. This could now surely be at risk."

Aside from the markets, political junkies will also get their fix on the news flow out of Brazil today.

Temer is not the only guy going under.

Senator Aecio Neves of the Social Democratic Party was stripped of his senate seat by the Supreme Court, Folha de Sao Paulo newspaper reported on Thursday. Neves, who almost beat Dilma for the presidency in 2014, allegedly asked for R$2 million from JBS. Two of Neves' family members were arrested this week as accomplices to a bribe scheme involving the senator.

Since Dilma impeachment, many of her supporters have argued that the Car Wash investigators were being selective in their targets of left wing politicians. The Workers' Party and Temer's Democratic Movement Party were once allies. Cunha was from Temer's party and is the biggest politician behind bars. The latest on Temer and Neves, president of the Workers' Party biggest rival party, shows that courts are aiming for anyone. The political persecution narrative is a hard sell.

Meanwhile, Brazil's biggest headwind is in the nation's capital. Political risk will likely undercut the reform agenda, an agenda that was already circling the drain like the congressional leaders who supported it. Thursday's stock action is likely an over-reaction, but a lot will depend on whether Temer finds a lifeboat or goes down with the ship. The entire political apparatus that has governed Brazil since 2003 continues to sink.

Find me on Twitter at @BRICBreaker</s>Brazilian President Michel Temer was allegedly caught in a secret audio recording authorizing the head of meatpacking giant JBS SA to pay bribes to buy the silence of disgraced political leader Eduardo Cunha, who is serving a 15-year prison sentence for corruption.

The recording was delivered to the Supreme Court on Wednesday as part of evidence in a plea-bargain deal that JBS’s Joesley Batista is seeking in relation to the mammoth Lava Jato graft investigation, according to a report in the newspaper O Globo.

The paper’s website crashed in the hour after the story broke.

The news roiled Brazil, as a nation that thought itself inured after three years of political turmoil confronted a dramatic ratcheting up of the level of chaos and uncertainty.

Television channels cut from regular programing to air scenes from Brasilia of top political leaders rushing red-faced and panic-stricken through the hallways of Congress, on their way to meet with Mr. Temer.

The President’s office released a statement confirming he met with Mr. Batista in March but denying the allegations: “President Michel Temer never solicited payments to obtain the silence of former [Congress] deputy Eduardo Cunha. He never participated and never authorized any action with the objective of avoiding testimony or co-operation with the justice system by the former member.”

The Lava Jato investigation has involved a succession of stunning revelations but never anything like this: all previous plea bargains have related to the recounting of bribery and other illegal actions committed in the past. But Mr. Batista, and his brother Wesley, with whom he runs JBS, appear to have been working together with police to entrap political figures in criminal activity.

O Globo reports that in recent weeks trusted Batista staffers delivered sacks of cash containing $1.3-million (Canadian) in numbered bills, tagged with traceable chips, as bribes to politicians, while police filmed.

Mr. Batista allegedly told Lava Jato prosecutors that he has paid $2.2-million to Mr. Cunha just since last October. The tape reportedly records the President saying, “You need to keep this up, got it?”

Mr. Cunha, an evangelical preacher, was the Speaker of the lower house of Congress and the most powerful man in the country until his ignominious downfall. He spearheaded the impeachment of former president Dilma Rousseff last year. Mr. Temer recently told an interviewer that Mr. Cunha told him he would make sure she was ousted after she refused to shut down an investigation into his actions. In March, Mr. Cunha was sentenced to 15 years for corruption and money-laundering, for taking bribes to ensure the awarding of lucrative state contracts – and then funnelling the money to Swiss bank accounts.

As he was forced out of office, Mr. Cunha warned that he had damaging information on virtually all of his political colleagues – and the O Globo story suggests that Mr. Temer and others have been keen to ensure he didn’t share that information.

Also named in the JBS plea bargain is Aecio Neves, the head of the Brazil Social Democratic Party (PSDB), who narrowly lost the last presidential race to Ms. Rousseff and was considered a contender for president in the next election. He was allegedly recorded asking Mr. Batista for $870,000 on March 24 to pay for expenses related to Lava Jato; he is under investigation for a range of financial crimes.

The Batista brothers have been charged with “crimes against the national finance system,” including misuse of loans from a national development bank.

The Lava Jato investigation has revealed an entrenched and widespread symbiotic relationship between Brazil’s largest businesses, particularly construction firms such as Odebrecht SA and agribusiness heavyweights like JBS. For decades, politicians have accepted off-the-books campaign funding and personal bribes from these companies in exchange for awarding enormous state infrastructure and procurement contracts and writing friendly legislation. A giant swath of the political class, including a third of senators and nearly a third of cabinet ministers, are under investigation or indictment in connection with Lava Jato.

Mr. Temer, alone, has been safe – until now. He has been named in a number of other plea bargains, relating to bribes he allegedly authorized before he took over as President with Ms. Rousseff’s ouster last August. But Brazilian law says he cannot be prosecuted for those crimes while he holds the office of President. However, the incidents in the reported recordings would seem to lead Brazil into new legal territory: these alleged crimes were committed just weeks ago.

“The owners of JBS made a joint plea bargain [to Supreme Court Justice] Edson Fachin, with recordings that link the President Michel Temer to Eduardo Cunha – something that is an atomic bomb,” Chico Alencar, an opposition member of Congress, said in the lower house when the news broke in the late evening. “It just keeps coming, in this country, because we have a corrupt and degenerate political caste.”

The tapes are theoretically part of a sealed deposition, but Brazil’s political crisis over the past two years has played out in a series of leaks to media. If the tapes prove to show what O Globo columnist Lauro Jardim has reported in his explosive story, it raises serious questions about Mr. Temer’s ability to hold the office until his term ends in late 2018.

In other countries, a president might see no option but to resign over news such as this, but this is less likely in Brazil, where Mr. Temer will likely hunker down and take refuge in a blizzard of court processes and bureaucracy.

Within an hour of the story being published, a member from Congress from an opposition party filed an impeachment request. Opposition members of Congress were reported to be negotiating the wording of a proposed constitutional amendment to try to force Mr. Temer out.

Many Brazilians also read into the fact that it was O Globo, a media conglomerate whose wealthy owners were viewed as backers of the Rousseff impeachment and supporters of Mr. Temer, that broke this story – a sign that he has lost their protection, which could complicate his efforts to see out his term.</s>RIO DE JANEIRO (AP) — Brazil’s political crisis deepened sharply on Thursday with corruption allegations that threatened to topple the president, undermine reforms aimed at pulling the economy from recession and leave Latin America’s largest nation rudderless.

Stocks plunged, both chambers of Congress cancelled sessions and President Michel Temer’s office canceled his planned activities Thursday in the wake of a Globo newspaper report that he had been taped endorsing bribery of a former lawmaker.

Protests were planned in several cities and opposition politicians took to Twitter and local news channels to call for Temer to resign or be impeached, arguing his government no longer had legitimacy

“I can’t see how Temer survives this,” said David Fleischer, a political science professor at the University of Brasilia. “There are just too many people against him now.”

The country’s main Ibovespa stock index dropped 10 percent within 90 minutes of opening and trading was stopped for 30 minutes. Analysts predicted the Brazilian real would fall sharply against the U.S. dollar.

The scandal deepened at dawn Thursday as police searched the Rio de Janeiro home and Brasilia office of Sen. Aecio Neves, who nearly won the presidency in 2014 and planned to run again next year.

Neves is being investigated in several corruption cases related to the “Car Wash” probe into kickbacks to politicians. He has denied wrongdoing.

Late Wednesday, Globo reported that Neves had been recorded asking JBS meat-packing company executive Joesley Batista for $700,000 to pay for his “Car Wash” defense.

Neves’ whereabouts Thursday were not known. Attempts to reach him for comment were not successful.

Globo also reported that Batista had recorded Temer endorsing a bribe to silence former Speaker of the House Eduardo Cunha. In a statement late Wednesday, the president’s office said Temer did not participate or authorize any attempt to keep Cunha from reaching a plea bargain with Justice (officials).”

If confirmed, the tape could prove devastating for Temer, whose administration has lurched from one crisis to another since he took office just over a year ago.

Cunha led the impeachment fight that removed Dilma Rousseff from the presidency last year and put Temer, then the vice president, into power. Cunha was later imprisoned on a 15-year sentence for corruption.

The statement from Temer’s office confirmed that the president did meet with Batista in March. According to the Globo report, Batista secretly recorded the conversations with Temer and Neves and gave them to justice officials as part of plea bargain negotiations.

The report said that when Temer was told Cunha was being paid to keep silent, the president responded: “You have to keep that up, all right?”

Globo did not release the recordings or say how they were obtained.

JBS representatives did not respond to emails sent by The Associated Press seeking comment.

Temer and Cunha are members of the same party and were previously allies. However, they appear to have had a falling out amid a growing investigation into corruption involving the state oil giant Petrobras. Since launching three years ago, the “Car Wash” probe into billions of dollars in kickbacks has put several top businessmen and politicians in jail.

Many believe that Cunha, who was widely viewed as Brazil’s most powerful politician before being ensnared in several corruption cases, could provide damaging testimony about dozens of others if he reaches a plea bargain with investigators.

Soon after Wednesday’s report, both the Senate and Chamber of Deputies stopped sessions that included work on legislation that Temer’s administration is pushing in hopes of pulling Latin America’s largest economy out of its worst recession in decades.

“This climate isn’t one in which to work,” Rodrigo Maia, president of the lower chamber, told Globo News.

Globo’s reports are the latest in numerous scandals that have plagued Temer, whose approval ratings are hovering around 10 percent. In April, it came to light that eight of his Cabinet ministers were being investigated in cases related to bribery or accepting campaign donations from Brazilian constructor Odebrecht, one of the central companies in the kickback scheme at Petrobras.

The Eurasia risk consultancy said the new allegation threatens Temer.

If the allegations are proven true, “President Temer is unlikely to finish his term,” Eurasia wrote, adding that at the very least the matter will delay major reforms Temer is proposing.
The Brazilian Supreme Federal Court releases a plea bargain testimony from JBS S.A., revealing that the company paid 500 million reais in bribes to politicians, including current President Michel Temer and his predecessors Dilma and Lula.