Federal probe into campaign finance scheme makes Lula da Silva's top congressional liaison resign

Brazilian President Luiz Inacio Lula da Silva's top congressional liaison quits because of a federal probe into a campaign finance scheme.

Walfrido dos Mares Guia decided to submit his resignation after federal prosecutors announced they had asked the Supreme Court to charge Mares Guia and other 14 people with embezzlement and money laundering in connection with a 1998 gubernatorial election campaign in Minas Gerais state, Agencia Brasil said.

Mares Guia and the candidate, Eduardo Azeredo, have denied participation in any illegal fundraising activity.

While Mares Guia's press office refused to immediately confirm or deny the resignation, some Cabinet ministers spoke of it as a fact.

"It's a loss for the government," Finance Minister Guido Mantega told Globo TV. He said Mares Guia "performs a fundamental role" in political coordination.

Federal prosecutors say Mares Guia - Silva's minister of institutional relations - participated in a scheme to raise more than US$56 million; 38 million EUR) for Azeredo's campaign.

Azeredo, now a senator, lost the election to former Brazilian President Itamar Franco.

The scheme was uncovered alongside a similar operation allegedly used to collect funds for Silva's 2002 presidential election campaign.

That operation allegedly diverted millions from public coffers to finance political activities and the Supreme Court is hearing charges against 40 individuals, including former high-ranking government allies.

The president has not been personally implicated in any wrongdoing, but his former Chief of Staff Jose Dirceu and other top officials of his Workers Party have resigned.

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Author`s name Angela Antonova