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Tuesday
Sep292015

Bill and Melinda Gates Foundation sues Petrobras and PwC for millions in graft damages

The Bill and Melinda Gates Foundation Trust filed a lawsuit in New York Thursday against Brazil’s state-owned oil giant and its auditor, alleging the loss of millions of dollars from the ongoing graft scandal.

The suit filed in federal court in Manhattan claims there was a “pervasive bribery and money laundering scheme” at Petróleo Brasileiro S.A. or Petrobras, Reuters said.

The trust and a second plaintiff, WGI Emerging Markets Fund, also claim the company’s auditors “willfully ignored” wrongdoing, Dow Jones Business News noted.

The auditors are named in the suit as the Brazilian unit of PricewaterhouseCoopers.

The trust is seeking undisclosed damages for investments in Petrobras American depository shares that it said it would not have purchased had it known about the company’s problems. Tax filings show the trust held more than $27 million in Petrobras shares as of 2013, Dow Jones Business News said.

The trust manages the Bill and Melinda Gates Foundation’s $41.3 billion endowment. The foundation itself is not a plaintiff.

The Petrobras scandal has landed several executives in jail in Brazil.

Prosecutors there allege that Petrobras employees collaborated with other firms to inflate the cost of contracts and skim the excess funds, a scheme that also allegedly included bribery and money laundering.

The company’s third quarter 2014 results were delayed three times after PwC refused to sign off on accounts tied to transport chief and politician Sergio Machado.

Machado was accused by former downstream chief Paulo Roberto Costa of using funds skimmed from a Petrobras project to pay for political campaigns. He has denied any wrongdoing.

Last month, former Petrobras executive Nestor Cerveró was sentenced to 12 years in prison for money laundering and corruption for a bribe he allegedly paid lower house speaker Eduardo Cunha.

Prosecutors alleged that Cerveró, along with consultant Julio Camargo and lobbyist Fernando Soares, organized bribes from Korea-based shipbuilder Samsung Heavy Industries in exchange for two drillship contracts.

In July, Brazilian prosecutors officially charged Marcelo Odebrecht, CEO of construction firm Odebrecht SA, with corruption, money laundering and criminal conspiracy. Prosecutors allege that Brazil-based Odebrecht SA laundered more than 1 billion reais, or about $300 million, from 2006 to 2014.

The scandal has made its way to the upper echelons of Brazilian politics, with former Brazilian president Luiz Inacio Lula da Silva under investigation for potential influence peddling.

Petrobras, already the most indebted energy company in the world, has been reeling from the fall out. It booked a $7.15 billion loss for 2014 primarily due to a $14.76 billion impairment charge and a $2.05 billion write down for “improperly capitalized additional spending” tied to the ongoing corruption probe.

Moody’s downgraded Petrobras bonds to junk in February and kept its negative outlook on the company.

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Nicolas Torres is a reporter for Petro Global News, where a version of this post first appeared.

Reader Comments (1)

No end in sight for Brazil's plight.
September 29, 2015 | Unregistered Commenterdurban
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