The chairman and chief executive of Brazilian investment bank, BTG Pactual, Andre Santos Esteves, has been forced to resign following his arrest amid accusations of bribery.

According to press reports, Esteves was accused of allegedly conspiring with Delcidio Amaral, head of the government coalition in the Senate, who was also arrested, to hide evidence. Prosecutors have also alleged that BTG Pactual bribed government officials in 2013 in exchange for favours. Esteves, Amaral and BTG Pactual have denied any wrongdoing. The arrest of Esteves is part of a long-running investigation, Operation Lavo Jato, which has become a notorious corruption scandal involving senior Brazilian politicians and major companies.

Financial communications company, Brunswick, published a report on the scandal in April which noted that what had begun as allegations of kickbacks at the state-owned oil giant, Petrobras, had snowballed into a corporate crisis for many of the country’s biggest companies, whose business has dried up; an economic crisis as the scandal’s impact on investment drags Brazil deeper into stagflation; and a political crisis for President Dilma Rousseff. Ratings firm Fitch Ratings placed BTG Pactual on ratings watch negative following the arrest and resignation of Esteves.

BTG Pactual said it had set up a special committee, made up of a majority of independent members of the board of directors, to oversee and direct an investigation into the allegations associated with the arrest of Esteves, as well as any related matters arising from the arrest of Mr. Esteves by the Brazilian authorities. The company said its board of directors 'would place no limits on the authority of this committee to investigate these matters and any related matter it deems appropriate'. International law firm Quinn Emanuel Urquhart & Sullivan is to conduct the investigation with the assistance of a Brazilian law firm which will be appointed shortly.

Following the resignation BTG Pactual appointed Persio Arida as executive chairman and John Huw Jenkins as vice-chairman. Marcelo Kalim and Roberto Sallouti were appointed co-chief executives of the bank. Speaking after the formation of the special committee Arida said, “I am pleased with the progress we have made in strengthening our business and we thank our clients for their support in this difficult period.  We are led by a highly experienced and dedicated management team, which has worked tirelessly and decisively to successfully stabilise our business. In addition to ensuring that we are appropriately funded, we have disposed of a number of non‐core assets, including Rede D’Or, certain credit portfolios and other private equity positions, and have arranged a R$6 billion line of credit from FGC (bank industry-backed fund) in Brazil.   We will continue to push for further asset sales over the weeks to come.”

The company has also denied making any payments in exchange for a tax break provision of Brazilian law in 2013.