By Aruna Viswanatha, Jeffrey T. Lewis and Samuel Rubenfeld
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (September 28, 2018).
Brazilian oil company Petrobras has agreed to an $853.2 million
settlement with U.S. and Brazilian authorities to end yearslong
investigations tied to one of the biggest corruption schemes ever
uncovered.
Petróleo Brasileiro SA, as the company is formally known, said
Thursday it would pay $682.6 million to a Brazil fund for promoting
corporate transparency and compliance and an additional $170.6
million equally split between the U.S. Justice Department and the
U.S. Securities and Exchange Commission.
The corruption scandal at the state-controlled oil producer
erupted in 2014, when Brazilian prosecutors first announced their
investigation into a cartel of construction companies that had been
overbilling Petrobras and bribing high-level Brazilian politicians
and Petrobras executives along the way.
The investigation, known as Operation Car Wash, has loomed over
Petrobras and Brazil ever since. It led to multibillion-dollar
losses at the company and slammed its share price, while also
sending former Brazilian President Luiz Inácio Lula da Silva and
top business executives to jail. The scandal also continues to roil
the country's current presidential election campaign.
Several Petrobras executives directly involved in the corruption
have been convicted and jailed, including Paulo Roberto Costa,
formerly head of the company's downstream division, and Nestor
Cervero, former director of international operations. A former
Petrobras chief executive, Aldemir Bendine, was also convicted of
bribery earlier this year, though on charges related to his time as
CEO of state-controlled lender Banco do Brasil.
For Petrobras, the uncertainty over legal repercussions eases
considerably with the deal, though analysts caution that there are
still lawsuits pending in Brazil and the Netherlands and an
arbitration process in Argentina. In the meantime, the company's
new management has returned Petrobras to profitability and is
working to reduce its mountain of debt, aided by rising oil
prices.
"It's a new story now. Petrobras is living a new phase," said
Raphael Figueiredo, an analyst at Eleven Financial Research in São
Paulo, adding that the deal "opens up new opportunities."
Petrobras's preferred shares rose 4.3% to 21.05 reais ($5.26) in
Thursday afternoon trading. The share price sank as low as 4.41
reais in 2016, from about three times that just before news of the
scandal broke.
The Car Wash probe grew rapidly and ensnared other giant
Brazilian businesses, notably construction company Odebrecht SA,
which Brazilian prosecutors said was the ringleader in the
builders' cartel.
Odebrecht agreed in 2016 to pay $2.6 billion to resolve charges
in the U.S., Brazil and Switzerland, with $93 million going to the
U.S. The company's former chief executive officer, Marcelo
Odebrecht, remains under house arrest after serving 2 1/2 years of
a 10-year sentence for corruption charges in a jail cell.
As cast in Thursday's agreement, U.S. prosecutors viewed
Petrobras in part as a victim of the conduct of its executives and
managers, who were embezzling from the oil company.
The Justice Department agreed not to prosecute the company in
exchange for an $85.3 million payment, three years of compliance
reports and an admission that the scheme amounted to criminal
violations of laws that require public companies to maintain
accurate books and records. The company said it will continue to
cooperate in ongoing investigations, including of individuals.
One of the laws at issue, the Foreign Corrupt Practices Act,
bars U.S.-listed companies -- Petrobras is one -- from paying
bribes to foreign government officials and requires public
companies to maintain accurate financial records.
Petrobras admitted that members of its board directed millions
of dollars in illicit payments to Brazilian politicians and
political parties, prosecutors said. Such payments included bribes
directed by one executive to stop a parliamentary inquiry into the
company's contracts.
"Executives at the highest levels of Petrobras -- including
members of its Executive Board and Board of Directors --
facilitated the payment of hundreds of millions of dollars in
bribes to Brazilian politicians and political parties and then
cooked the books to conceal the bribe payments from investors and
regulators," the head of the Justice Department's criminal
division, Brian Benczkowski, said.
Petrobras reached a related $930 million deal with the SEC, but
the agency said it would credit all but an $85 million penalty to a
settlement that the company reached earlier this year with
investors who had sued the company over the corruption scheme.
The Petrobras settlement, with one-fifth of the penalty amount
going to the U.S., is the latest example of U.S. prosecutors
working with foreign counterparts to reach a simultaneous agreement
with the multinational firm. It also follows recent policy
pronouncements by the Justice Department that it wouldn't "pile on"
a corporate offender.
Companies and their attorneys have welcomed this approach to
corporate criminal settlements, saying it helps them resolve cases
that can linger for years and cost hundreds of millions of dollars
-- even before striking a settlement.
--Paulo Trevisani contributed to this article.
Write to Aruna Viswanatha at Aruna.Viswanatha@wsj.com and
Jeffrey T. Lewis at jeffrey.lewis@wsj.com
(END) Dow Jones Newswires
September 28, 2018 02:47 ET (06:47 GMT)
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