BRASILIA, Brazil (AP) – Brazil’s Cabinet-level Chief of Staff Jose Dirceu resigned yesterday amid accusations he knew of a vote-buying scheme in Congress but did nothing to stop it.

Dirceu, a close ally and personal friend of President Luiz Inacio Lula da Silva, announced his resignation in a nationally televised statement.

“I requested and told the president that I wish to return to the Chamber of Deputies,” he said. “He accepted my request to leave the government.”

Dirceu said Silva would formally reply next week and determine “the future of the Cabinet post,” but that he expected to resume his position as a congressman.

Considered one of Silva’s most influential ministers, Dirceu was accused by congressman Roberto Jefferson of involvement in a plan to pay legislators a monthly bribe to support the governing Workers Party.

Jefferson, who is president of the centre-right Brazilian Labor Party, said Dirceu knew the governing party paid monthly “allowances” of more than US$12,000 (euro9,800) but did not report it.

Jefferson said the Workers Party flew suitcases of cash to Brasilia, the capital, to pay congressmen for their support to keep Silva’s fragile governing coalition intact. The leftist party, known as the PT, does not have a majority in Congress and relies on support from other parties to pass legislation.

Jefferson said Silva didn’t know of the payoffs and cried when he was told.

Dirceu strongly denied he was involved, and Jefferson admitted he had no proof. But the accusations sent shock waves through Brazilian markets, and stocks plunged before Jefferson testified before Congress on Tuesday.

Stocks rebounded after Jefferson didn’t offer proof or directly accuse top officials. But he said Dirceu should “get out,” and not make a “hostage of an innocent man” – which Brazilians understood to mean Silva.

Silva, elected in 2002, is expected to run for re-election next year.

Dirceu said he would work in Congress to disprove “the baseless accusations against me, my party and my government”.

“I don’t consider myself out of the government,” he said. “I will mobilise the PT against those who… want to destabilise President Lula.”

But it was Dirceu’s second brush with scandal. Last year, former presidential aide Waldomiro Diniz – a close friend and former roommate of Dirceu – was found to have used his influence to conduct illegal business transactions.

Diniz was forced to step down after a national news magazine detailed his involvement in a scheme to solicit campaign funds, as well as a hefty commission for himself, from an illicit numbers game runner in 2002, before he became a presidential aide.

“I didn’t do anything I’m ashamed of,” Dirceu said. “My hands are clean. I leave with my head held high.”