Petrobras writedown strengthens class-action suit

Petrobras blames a group of Petrobras suppliers, corrupt politicians and former Petrobras employees, and none of them have been named as defendants.

Petrobras writedown strengthens class-action suit

World Bulletin / News Desk

 Brazilian oil company Petrobras' $17 billion write-down, announced last week, may have been meant to close the accounting on a sprawling corruption scandal, but could instead provide fresh ammunition for a U.S. class action lawsuit.

The case, filed in Manhattan federal court in December by a group of large investors, alleges $98 billion of the company's American depository shares, or ADRs, and bonds were artificially inflated since 2010 by the company overstating the value of assets such as major projects. Petrobras has moved to have the case dismissed.

The plaintiffs say Petrobras improperly inflated the project costs to fatten profits of suppliers and contractors, who in turn kicked cash back to Petrobras employees.

Last week, the company wrote down assets to reflect a more accurate value, and the lawyer leading the class actions for investors said the restatement is "highly relevant" to the case and bolsters his clients' allegations.

"We believe these facts are certainly helpful to our case," said Jeremy Lieberman, an attorney with the Pomerantz law firm in New York, who is leading the plaintiffs' case.

Petrobas has argued that investors are taking aim at the wrong parties. It wants the case dismissed before investors can begin the process of demanding evidence from the company, such as documents and witnesses which might prove their case.

"Petrobras itself was the victim in this scandal, carried out by a criminal cartel of Brazil's largest construction and engineering companies," said the defendants in papers filed in U.S. District Court in Manhattan.

The investors are due to file papers opposing Petrobras' motion to dismiss on May 8.

More than a dozen large investors sued Petrobras beginning last year, including the City of ProvidenceRhode Island, and public pension systems in Ohio and other states. Those cases were consolidated in March and British pension fund Universities Superannuation Scheme Ltd, which said in a court filing it had lost about $84 million on its Petrobras holdings, was appointed lead plaintiff. It will represent the proposed class and negotiate any eventual settlement.

The $98 billion of stocks and bonds that the plaintiffs allege was artificially inflated is more than half again the company's $59.6 billion stock market capitalization today. Petrobras' $70 billion secondary share sale in 2010 was the largest sale of stock in history.

Petrobras has fallen a long way from seven years ago, when it grew to the world's fifth-largest company and became a way to bet on Brazil's bustling economy and recently discovered deep-sea oil reserves. Today, the economy has stalled, oil output is flat and Petrobras is the world's most indebted energy company.

Last Mod: 28 Nisan 2015, 14:27
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