Foreign
Corruption
Petrobras
hit with U.S. class action suit over $98 billion in securities
Fri Dec 26, 2014
4:48pm EST
Petrobras Chief Executive Maria das Gracas Silva Foster (R) attends a
breakfast with journalists in Rio de Janeiro December 17, 2014.
CREDIT: REUTERS/RICARDO MORAES
(Reuters)
- Brazil's state-run oil company Petroleo Brasileiro SA and some of its
executives were hit with a U.S. class action lawsuit by investors in $98
billion of the company's securities over an alleged kickback and bribery
scheme.
News
of the case helped knock Petrobras shares more than 4 percent lower. In
mid-December, the stock hit its lowest in nearly 10 years as a widening
corruption probe caused the company to delay the release of its third-quarter
earnings.
Petrobras
has already been sued by several U.S. investors who bought American Depositary
Receipts sold by the company in New York.
The
latest case was filed on Dec. 24 in Manhattan's federal court by the Labaton
Sucharow law firm on behalf of the city of Providence, Rhode Island, which
invested in Petrobras.
The
lawsuit proposes to cover $98 billion of securities Petrobras sold since 2010,
and any judgment or settlement would benefit the investors who purchased those
securities.
Allegations
include that the company made material misstatements about the value of its
assets in bond offering documents.
Such
an allegation does not require proof that misstatements were made knowingly,
and allows plaintiffs to name as defendants the Brazilian and international
banks that managed the sale of those bonds.
Unlike
the previous class actions by ADR holders, the latest lawsuit also names as
defendants Petrobras executives, including Chief Executive Maria das Gracas
Foster.
In
Rio de Janeiro, a Petrobras spokeswoman said the company had not received a
citation from the reported class action suit filed on Christmas Eve.
On
the Sao Paulo stock market, Petrobras' shares fell 4.5 percent, pummeled by
Moody's placing its credit rating on review for a possible downgrade and news
of the latest U.S. class action suit.
The
shares were on track to post their steepest loss since Dec. 15 when they
plunged about 9.2 percent.
So
far 39 people have been indicted on charges that include corruption, money
laundering and racketeering in the Petrobras graft scheme that allegedly funneled
money to political parties, including Rousseff's Worker's Party and its allies
in Congress.
On
Monday, Brazilian President Dilma Rousseff said there was no evidence that
Petrobras senior management was involved in the graft scandal.
Last
week, Petrobras said it will scale back spending to avoid having to issue debt
next year. It cannot issue new debt until it releases third-quarter earnings,
which were delayed after auditor PriceWaterhouseCoopers refused to certify them
owing to the corruption scandal.
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