FOR IMMEDIATE RELEASE:
Class action lawsuit stemming from Operation Car Wash accused Brazilian
petrochemical giant of price-fixing, lying to U.S. investors.
Washington, D.C. — Petrochemical giant Braskem S.A. (NYSE: BAK) will pay U.S. investors $10 million for concealing the company’s role in the massive corruption scandal centered around Petrobras, Brazil’s state-owned oil company. Shareholders had filed a class action suit claiming Braskem defrauded investors by hiding the role bribery played in keeping the price of materials low, creating an artificially inflated stock value.
“Braskem investors were sadly the victims of a shadowy bribery scheme and a scandal that has engulfed Brazil and reverberated worldwide,” said Steven J. Toll, Co-Chair of Cohen Milstein’s Securities Fraud and Investor Protection practice and lead counsel for the plaintiff class. “This settlement not only brings financial relief to our clients, but is a victory for all who have been hurt by Braskem, Petrobras and the other participants in an unprecedented system of political and corporate corruption.”
The lawsuit alleged that Braskem, the largest petrochemical company in the Americas and the world's leading biopolymer producer, had for years misled investors into believing the company’s operations were legitimate. However, Braskem executives had failed to disclose at least $5 million in annual payments between 2006-2012 to Petrobras officials and others in exchange for lower prices on naphtha, a critical ingredient in Brazilian petrochemicals. It is estimated that Braskem bought 70 percent of its naphtha from Petrobras, and that this accounted for as much as half of its operating costs.
A group of institutional and individual investors originally filed the lawsuit in 2015 after reports emerged implicating Braskem in the Petrobras scandal, causing the value of Braskem’s stock – in the form of American depository receipts (ADR), a common type of security that allows U.S. investors to purchase shares of foreign companies – to fall and leading to heavy shareholder losses. The investors argued that they had been misled by the company’s statements into believing that its operations were legitimate and legal.
Today’s settlement comes just a few weeks after the Brazilian government formally charged ex-presidents Dilma Rousseff and Luiz Inacio Lula da Silva with racketeering for plotting to steal funds from Petrobras. The continuing corruption probe into Petrobras, dubbed “Operation Car Wash,” has led to the indictment of about several dozen people, including other high-ranking politicians and powerful corporate executives.
Last December, Braskem agreed to pay the U.S., Brazilian and Swiss governments approximately $957 million in criminal and regulatory penalties arising out of the bribery scheme.
The case is Peters v. Braskem SA et al, case number 1:15-cv-05132, in the U.S. District Court for the Southern District of New York.
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