Petrobras pushes to dismiss US class action

OREANDA-NEWS. June 26, 2015. Lawyers for Brazil's state-controlled Petrobras say a US federal court should throw out a class action lawsuit stemming from a multi-billion-dollar corruption scheme at the firm.

Judge Jed Rakoff heard oral arguments today in the Court for the Southern District of New York but is not expected to rule on Petrobras' motion for dismissal until mid-July.

Eight plaintiffs, led by UK-based Universities Superannuation Scheme pension fund, claim Petrobras committed securities fraud when it issued materially false and misleading statements concerning its operations in the years before the corruption scandal was revealed. In its third quarter results, Petrobras took a \\$2.5bn write-off on corruption charges and an almost \\$17bn impairment on assets linked with overpriced contracts.

Petrobras claims it was not aware of a cartel — allegedly formed by some of Brazil's biggest construction and engineering firms — that inflated contracts for major downstream projects. The company says it is the victim of the scheme that allegedly diverted funds from overpriced contracts to "rogue politicians" and corrupt former directors.

That defense has largely protected the firm from civil liability in Brazil, but may not be enough to convince the US court to dismiss defendants' claims.

The exact figure of damages being sought by minority shareholders is unclear, although some analysts say damages could reach upwards of \\$1bn.

In addition to multiple ongoing federal investigations in Brazil, Petrobras is being investigated by the US Securities and Exchange Commission and the Department of Justice.

Federal prosecutors in Brazil have called on US agencies to help them build their cases against the construction firms alleged to have participated in the kickback scheme.