VALE3 Vale SA

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 (February 8, 2019).

In Brazil case, court documents show the auditor told police he feared losing business

By Luciana Magalhães and Samantha Pearson 

SÃO PAULO -- A safety auditor who inspected a Vale SA mine-tailings dam that collapsed in January killing at least 150 people told police he felt pressured to attest to its stability, despite indications it was unsafe, because he feared losing business with the company, according to court documents seen by The Wall Street Journal.

Brazilian authorities are trying to pinpoint the causes of the disaster at the iron-ore mine in the rural town of Brumadinho, the worst of its kind in more than 50 years, and are investigating whether Vale was aware of any potential risks to the integrity of the dam.

The safety auditor, Makoto Namba, a 62-year-old civil engineer employed by German inspection company TÜV SÜD, told police that Vale knew there were problems with the dam, according to the court documents. Mr. Namba said he told Vale that water was leaking into the reservoir behind the dam, and that its drainage system was insufficient.

As the world's largest iron ore miner and one of the country's biggest exporters, Vale wields great influence over Latin America's largest nation, employing more than 100,000 people. Just as many of Brumadinho's residents rely on the company for their livelihoods, the industry's auditors also rely on the company for a large chunk of their business.

Mr. Namba told police that Vale should have relocated the canteen and offices on the site as they were directly beneath the dam and potentially in danger, according to the court documents.

The mine's canteen and offices, as well as a hotel and nearby homes, were wiped away when the dam's collapse on Jan. 25 unleashed a tsunami of mining waste that struck the lunchroom with such force that bodies were found almost a mile down the valley.

Rescue workers had recovered 150 bodies by late Thursday. Another 182 people are missing and presumed dead.

Police believe the 280-foot-high dam may have collapsed after water built up beneath its solid mud surface. Mining experts said that excess water could have prompted the dam's contents to suddenly turn to liquid in a process called "liquefaction", prompting the lava-like mud to burst out.

Investigators said the same process occurred when another mine part-owned by Vale 80 miles from Brumadinho collapsed in 2015, killing 19 people.

When TÜV SÜD attested to the dam's safety in a report in September, it also detailed a number of factors that mining experts said should have raised red flags about the overall safety of the dam at Vale, largely related to the dam's drainage and how much water was in the tailings collected by the dam.

In TÜV SÜD's report, which was reviewed by the Journal, the auditor recommended that Vale repair damage to drainage systems in certain parts of the dam. Some of the water-drainage tubes and channels had been clogged by vegetation or damaged by cows trampling over the site.

Mr. Namba said he signed off on the safety of the dam on the promise that Vale would follow TÜV SÜD's recommendations. According to the court documents, Mr. Namba said that a technical director at Vale told him, "Is TÜV SÜD going to sign this safety declaration or not?"

Mr. Namba told police he felt that comment was a "way to pressure Mr. Namba and TÜV SÜD to sign the safety declaration or risk losing the contract." Mr. Namba told police he started working for TÜV SÜD when it acquired a Brazilian consulting firm where he had worked for two decades.

Vale said that it is cooperating with the authorities and has provided them with internal documents related to the dam. The company said it has no record of an increase of water in the dam and some data indicate a reduction of water.

A person close to the miner said Vale is reluctant to draw conclusions based only on Mr. Namba's account.

TÜV SÜD said it is deeply saddened by the dam's collapse and it is carrying out its own investigation into what happened, and cooperating with the authorities.

Emails exchanged between Vale and TÜV SÜD just days before the dam collapsed showed that Vale was also aware of potential problems with the sensors at the dam, according to the documents.

Mr. Namba told police that if those problems with the sensors were confirmed, and his own son were working at the facility, he would have called him immediately and told him to flee, according to the documents.

The Wall Street Journal reported last week that TÜV SÜD worked as both a consultant and an independent safety evaluator for Vale, raising questions among experts over potential conflicts of interest.

Employees of TÜV SÜD acted as consultants on Vale mine closures, co-authored research reports with the miner, and spoke at conferences alongside representatives of the Brazilian company.

International industry benchmarks on the management of tailings dams stress that a safety inspector should be able to demonstrate independence from a client.

But miners in Brazil have pushed back against these recommendations, said Joaquim Pimenta de Ávila, a Brazilian engineer who said he once audited the dam. Miners also frequently change their auditors, putting extra pressure on inspection firms to do what they can to hold on to their clients.

--Jeffrey T. Lewis and Paulo Trevisani contributed to this article.

Write to Luciana Magalhães at Luciana.Magalhaes@wsj.com and Samantha Pearson at samantha.pearson@wsj.com

(END) Dow Jones Newswires

February 08, 2019 02:47 ET (07:47 GMT)

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