More than a year after Brazil’s Federal Police uncovered a scheme of unauthorized payroll deductions from retirees and pensioners, court actions against the entities responsible remain in their early stages.
The government reached a reimbursement agreement with 4.8 million beneficiaries. The measure has already cost R$3.3 billion in public funds, and the national social security institute, INSS, expects the total to reach approximately R$6.3 billion.
To cover those costs without breaching its fiscal targets, the federal government issued a provisional measure opening an extraordinary budget credit of R$3.3 billion for 2025. In July it sent a further provisional measure to Congress seeking an additional R$547 million for the same purpose.
Brazil’s federal legal agency, the AGU, filed 45 lawsuits against the associative entities that made the unauthorized deductions. Of those, 37 were filed under the Anti-Corruption Law and eight are debt-recovery actions. Injunctions issued so far have ordered the freezing of more than R$6 billion in defendants’ accounts, though the AGU has managed to locate R$524.6 million of that amount. Courts also constrained 93 properties, 164 vehicles and one boat, and ordered the lifting of the financial and tax secrecy of those under investigation.
The cases remain at an initial stage of proceedings. The AGU said it was awaiting judicial summons to file the main actions, which would seek sanctions including the compulsory dissolution of legal entities set up specifically to carry out the fraud.
In parallel, the CGU, the government’s internal affairs body, is conducting administrative accountability proceedings. Once concluded and ruled on by the CGU minister, those proceedings could result in fines and provide evidence for future court actions by the AGU.
Congress has approved a law prohibiting associative dues from being deducted directly from retirees’ benefits. Associations, unions and similar entities are now strictly barred from any such deduction, even if the beneficiary previously authorized it. Retirees who join such institutions must pay through channels outside the social security system.
Crisis for the Lula government
The scandal has been one of the biggest crises of President Luiz Inácio Lula da Silva’s third term. Federal Police singled out António Carlos Camilo Antunes, known as Careca do INSS, as a key figure. Their report said Antunes is a partner in 22 companies, several of which were allegedly used in the fraud. According to the Federal Police, companies linked to Antunes acted as intermediaries, receiving funds improperly debited from retirees and passing part of them to INSS employees or their relatives and associated companies. In total, individuals and companies linked to Antunes received R$53,586,689.10 from the associative entities.
The case has returned to public attention after the Federal Police announced an investigation into Fábio Luís Lula da Silva, known as Lulinha, the president’s eldest son, on suspicion of influence peddling and corruption related to negotiations over authorization for the commercialization of medical cannabis. Interest in the cannabis business had previously been linked to the INSS investigation: Lulinha traveled to Portugal alongside Antunes in a trip the Federal Police said was funded by the lobbyist. Lulinha said the purpose of the trip was to evaluate business opportunities in the medical cannabis sector.
Alessandro Stefanutto, former INSS president under the Lula government, was also indicted after part of the investigation concluded. The Federal Police determined he received R$250,000 per month in bribes from entities involved in the scheme.
The crisis led to the departure of Carlos Lupi as Social Security minister. Lupi denied any irregularities and called for severe punishment of those responsible for the unauthorized deductions.
