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UPDATE 1-Former Brazilian finance minister Palocci to 12 years in prison

(Adds details on potential plea bargain deal by Palocci)

SAO PAULO, June 26 (Reuters) - A Brazilian court on Monday sentenced former finance minister Antonio Palocci to 12 years in prison for corruption and money laundering in the country's massive corruption probe known as "Operation Car Wash."

The ruling by Judge Sergio Moro adds pressure on Palocci, who served as finance minister under President Luiz Inácio Lula da Silva and as chief of staff for Lula's successor Dilma Rousseff, to reach a plea bargain with prosecutors in a bid to have his sentence reduced.

A deal is expected to be announced by September, when Prosecutor-General Rodrigo Janot finishes his term and is set to be replaced by an appointee of President Michel Temer.

Palocci has offered to provide details about the kickback scheme under investigation that could hurt Lula's chances of running in the 2018 election.

Plea bargain testimony from Palocci, once one of Brazil's most powerful politicians, could widen the scope of investigations currently focused on engineering firms to include banks and other corporations.

Palocci, one of the closest advisers to Lula and former President Dilma Rousseff from 2003 to 2011, was jailed in September on charges he ran a bribery scheme funneling money to Lula's Workers Party. (Reporting by Pedro Fonseca; Writing by Bruno Federowski and Silvio Cascione; Editing by Jeffrey Benkoe)