Brazil arrests eight Vale employees in alleged cover-up in dam disaster

By Eduardo Simões and Marta Nogueira

SAO PAULO/RIO DE JANEIRO (Reuters) - Brazilian police arrested eight employees of mining firm Vale SA on Friday, accused by state prosecutors of covering up weaknesses at a dam that collapsed and likely killed more than 300 people.

Police also executed 14 search warrants as part of the probe of the country's deadliest mining disaster, prosecutors in the mining state of Minas Gerais said.

The arrests and search warrants targeted employees of Vale as well as German auditing firm TÜV SÜD, which had certified the dam as stable.

The arrests deepened a festering crisis for Vale, the world's largest iron ore mining company, whose share price has tumbled 18 percent since the disaster and subsequent civil and criminal probes.

The dam in the town of Brumadinho, which contained tailings, the mud-like byproducts of mining, burst on Jan. 25, killing at least 166 people. Almost 200 more are still missing.

"The eight Vale employees .. had full knowledge of the situation of instability in the dam and each one of them, as part of their job, also had the power and ability to adopt measures for either stabilizing the structure or evacuating areas at risk," a judge in Minas Gerais wrote in an arrest warrant, issued in response to a petition from the state prosecutor's office.

Vale said in a securities filing it was cooperating with the investigation.

The latest warrants followed the arrest last month of five Vale and TÜV SÜD employees, who were released by a higher court ruling on Feb. 5.

The most senior Vale employees arrested on Friday were Joaquim Toledo, Vale executive director of geotechnical operations, who led the team given the task of monitoring the dam's stability, and Alexandre Campanha, Vale executive corporate director of geotechnicals.

No top Vale executives have been arrested.

Prosecutors alleged that Campanha pressured Makoto Namba, a TÜV SÜD engineer who was arrested and later released, "to sign a declaration that the dam was stable, or risk losing the contract."

Minas Gerais prosecutors also sought the arrests of four TÜV SÜD employees, but the judge denied the request.

The prosecutors alleged "the four employees of TÜV SÜD participated in a scheme, sponsored by Vale, to make up technical numbers, and falsely pledge the stability of the dam, which allowed for the situation of risk to be perpetuated."

Neither Campanha nor Toledo could be reached immediately for comment. TÜV SÜD declined to comment.

Chief Executive Officer Fabio Schvartsman said on Thursday, in response to questions from lawmakers, that the company's safety procedures had not worked.

Reuters reported earlier this week that Vale had seen an internal report last year that the dam had a heightened risk of rupturing. Chief Financial Officer Luciano Siani said on Tuesday that Vale senior management were never shown the documents.

(Reporting by Eduardo Simões in São Paulo, and Marta Nogueira in Rio de Janeiro; Writing by Gabriel Stargardter; Editing by Mark Potter and Jeffrey Benkoe)