Court mulls Brazil president 'illegal accounting'

A Brazilian court was set to rule Wednesday whether President Dilma Rousseff's handling of government accounts in 2014 was illegal, potentially opening the way for opponents to launch impeachment proceedings.

The scheduled session at the Federal Accounts Court, known as the TCU, was the latest threat to Rousseff's increasingly beleaguered second term, which she began less than a year ago.

Rousseff is alleged to have violated public finance laws and the constitution in her management of government accounting by effectively taking illegal loans from state-owned banks to make up for budget shortfalls.

The government says it did nothing illegal and that it was merely juggling funds in line with previous practices.

If the TCU rejects Rousseff's version, this would give powerful ammunition to her many opponents in Congress, led by the scandal-plagued speaker of the lower house, Eduardo Cunha, who has repeatedly threatened to push for impeachment.

Late Tuesday, a different body, the electoral court, or TSE, ruled in favor of probing alleged illegalities in Rousseff's 2014 re-election campaign.

That ruling will not immediately lead to sanctions, instead opening the door to a messy legal and political battle that in theory could result in Rousseff's narrow victory being declared invalid -- and thus new elections being organized.

But especially worryingly for Rousseff is that one of the allegations in the complaint brought to the TSE by the opposition PSDB party was that some donations to the president's re-election coffers were linked in part to the massive Petrobras corruption scandal shaking the country.

Rousseff chaired Petrobras, the state oil giant, during the main period of the kickback and political payoff scandal that cost the company more than $2 billion in 2014.

But the scandal -- which has already seen dozens of politicians, high-ranking executives and lobbyists accused of corruption -- has so far left Rousseff relatively unscathed.

- Cliff edge -

Now facing possibly two probes and with the country plunged into steep recession, the president's rule is on a cliff's edge.

According to the latest opinion poll, approval for Rousseff, from the long-dominant Workers' Party (PT), is at just 10 percent.

Wednesday's session at the TCU appeared set to go ahead late in the day after the failure of a last-ditch government attempt to win a delay.

The attorney general had appealed to the Supreme Court for an injunction pending a decision by the TCU on a government request for a judge at the court to be removed because of his alleged partiality.

The judge, Augusto Nardes, has publicly stated that the government was wrong in its accounting practices, something the attorney general argues makes him unfit to continue on the case.

However, the Supreme Court rejected this request Wednesday.

Tuesday's ruling by the TSE electoral court was already a landmark, the first time the court has opened such a probe against a sitting president.

The complaint against Rousseff and her vice president Michel Temer alleges that they engaged in "abuse of economic power, and of fraud, by funding campaign expenses... with donations from Petrobras contractor companies as part of the bribes distribution."

However with Brazilian politics in so much upheaval, analysts say that the possible fallout from the court proceedings is hard to predict, as is the likelihood of Rousseff being forced from office.

Further muddying the waters, her nemesis, Cunha, is himself fighting allegations that he took a $5 million bribe in the Petrobras scheme and is hiding money in Swiss bank accounts.