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Brazil's Temer plays for time in case that could unseat him

By Anthony Boadle

By Anthony Boadle

BRASILIA (Reuters) - President Michel Temer's government expects a federal judge to recommend his removal for illegal campaign funding but believes it can stall a final decision by Brazil's top electoral court until after he leaves office next year, aides said.

If Temer can delay the process it could allow him to press ahead with fiscal reforms and austerity policies that have lifted Brazil's currency and stocks and raised chances the country will emerge from a deep recession in 2017.

The case before the Supreme Electoral Tribunal (TSE) alleges that proceeds from corruption and political kickbacks were used to fund Temer's 2014 election campaign when he was the vice presidential running mate to Dilma Rousseff, who was impeached last year for manipulating budget accounts.

Damaging new evidence was given on Wednesday by the jailed former CEO of Brazil's largest engineering firm, Marcelo Odebrecht, who confirmed that his company made illegal donations to the campaign to the federal judge handling the case.

Judge Herman Benjamin is now expected to recommend in coming weeks the ticket be annulled, presidential aides said.

If the decision were confirmed by the electoral court, Temer would be removed and a successor picked by Congress to lead Brazil to elections at the end of next year.

But Temer is playing for time, counting on a possible appeals process stretching on past the next general election scheduled for October 2018, in which he has said he will not stand, a presidential aide said on Thursday.

"There is an ample gamut of appeal options. The president thinks this will drag out into 2019," the aide said, requesting anonymity because he was not authorized to speak on the matter.

Legal experts said the court is a conservative panel unlikely to oust a president but that could change if Brazil's worst ever recession drags on and a widening bribery scandal paralyses Temer's government.

Brazil's establishment is bracing for the publication of explosive plea bargain statements by 77 Odebrecht employees expected to list dozens of politicians who took kickbacks from a company at the center of bribery investigations in a dozen Latin American countries.

O Globo newspaper reported on Thursday that Brazil's top prosecutor Rodrigo Janot was planning to open corruption investigations against 30 senators and congressmen next week based on the Odebrecht testimony.

The company's former chief executive confirmed that some 150 million reais were donated to the Rousseff-Temer campaign, including 50 million reais in bribes to facilitate legislation that favored Odebrecht.

A source with access to Odebrecht's statement told Reuters he testified Temer had never discussed a specific campaign contribution at a dinner in 2014, effectively sparing the president.

However, Brazilian media reported the jailed entrepreneur implicated Temer's chief of staff, Eliseu Padilha, as the man who handled the donations.

Odebrecht's testimony is expected to seal the fate of Padilha, who is facing other allegations of handling cash payments to fund Temer's PMDB party, but it will prolong investigations and gain the president vital time.

"The process will continue somewhat longer because more depositions and inquiries will have to be made now," Temer's lawyer Gustavo Guedes said by telephone.

Guedes said it was hard to tell whether the case would reach the TSE plenary this year or next.

In May, Temer will have the chance to fill two vacancies on the seven-member electoral court and is expected to appoint jurists who will favor his case.

(Reporting by Anthony Boadle, Editing by Andrew Hay)