Petrobras writedown may give new ammunition to class-action suit

Tue Apr 28, 2015 8:50am EDT
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By Tom Hals and Noeleen Walder

WILMINGTON, Delaware (Reuters) - 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.

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

The Petrobras logo is reflected in the window of the company's headquarters in Sao Paulo April 23, 2015. REUTERS/Paulo Whitaker