Brazil's Federal Police Charge José Dirceu in Petrobras Probe

SÃ O PAULO—Brazilian federal police arrested the former chief of staff of ex-President Luiz Iná cio Lula da Silva early Monday as part of a widening investigation into an alleged corruption scheme at state-run oil giant Petró leo Brasileiro SA, or Petrobras.

José Dirceu, who served as Mr. da Silva's chief of staff from 2003 to 2005, was apprehended in custody and charged on suspicion of corruption, conspiracy and money laundering. His detention is significant because he was a high ranking member of the ruling Workers' Party and formerly a close confidante of Mr. da Silva's, bringing the scandal a step closer to the top leadership of the party. Mr. Dirceu's attorney couldn't be reached for comment. Mr. da Silva couldn't be reached for comment. The Workers' Party declined to comment. Mr. Dirceu´ s lawyer said last month that his client denied wrongdoing in relation to Petrobras.

Mr. Dirceu served time in prison after being convinced for his role in a vote-buying scheme that erupted during Mr. da Silva's administration. Convicted in 2012, Mr. Dirceu was released from prison late last year, but remained under home detention, when he was arrested on Monday.

In addition to Mr. Dirceu, seven other people were arrested Monday as part of the latest phase of Operation Car Wash, the blockbuster investigation into an alleged bid-rigging-and-bribery ring at Petrobras.

Petrobras has said it is a victim of the alleged scheme and is cooperating with authorities.

According to the Federal Police the arrest of former minister Mr. Dirceu is part of a new phase of so-called Operation Car Wash, which started last year, and got this name because some funds were allegedly laundered through a gas station.

Federal Police said that Mr. Dirceu's arrest comes together with two other preventive arrest orders, five temporary arrests and 26 orders of search-and-seizure requests.

The people arrested are under investigation for corruption, conspiracy and money laundering, the Federal Police said in a statement.

Brazilian authorities last year uncovered what they alleged to be a decade long scheme that touched business leaders and government. Prosecutors allege that Brazil´ s largest construction firms inflated the prices of Petrobras contracts by billions of dollars, kicking some of their gains to company insiders and politicians.

In 2012, Mr. Dirceu was found guilty on charges of corruption in a previous corruption scandal.

The chief of staff was accused of offering monthly bribes to members of Congress in exchange for their votes. Prior to his sentencing, Mr. Dirceu and other members of Mr. da Silva's administration, who said they were innocent, resigned in face of the allegations, saying they wanted to save the administration from embarrassment.

Write to Luciana Magalhaes at [e-mail] and Rogerio Jelmayer at [e-mail]

Subscribe to WSJ: http://online.wsj.com?mod=djnwires