UPDATE 4-Corruption revelations overshadow Lula's planned return in Brazil
(Adds Dilma meeting with Lula until late, papers reporting potential investigation of president)
By Lisandra Paraguassu and Maria Carolina Marcello
BRASILIA, March 15 (Reuters) - Brazilian President Dilma Rousseff's efforts to bolster her government amid a storm of corruption allegations by naming her predecessor Luiz Inacio Lula da Silva to her cabinet were overshadowed on Tuesday by a barrage of fresh accusations against a minister.
Rousseff and Lula were meeting until late in Brasilia and no official announcement had been made as news of the planned appointment was overtaken by the publication of damaging new allegations from a senator in plea bargain testimony made public by the Supreme Court.
The testimony by Senator Delcídio do Amaral, a close ally of the president until he was arrested last year, accused both Rousseff and Lula of being aware of corruption at state-run oil company Petroleo Brasileiro SA and said the president had tried to hamper the investigation.
Presidential aides said the charismatic Lula, Brazil's first working-class president, had decided to accept a ministerial position in Rousseff's cabinet, a move that would offer him protection in the short term from prosecutors who have charged him with money laundering and fraud.
One of the aides, who asked not to be identified so he could speak freely, said Lula, a talented negotiator, would take charge of legislative affairs, where he could leverage his close ties to congressmen from the ruling Workers' Party to rally votes for the government.
"We were hoping to change the mood with Lula's appointment, but this recording is another huge blow," another aide told Reuters.
In the most damaging allegations, Amaral said Aloízio Mercadante, a Workers' Party veteran who has served as Rousseff's chief-of-staff and is now education minister, offered to pay him to keep quiet last year. Continuación...