In the Matter of Petróleo Brasileiro S.A. – Petrobras (2018)

• Case Name
• In the Matter of Petróleo Brasileiro S.A. – Petrobras (2018)

• Date Filed
• 09/27/2018

• Enforcement Agency
• SEC

• Countries
• Brazil

• Foreign Official
• Senior executives at Petrobras, Brazil’s government-controlled oil and gas company.

• Date of Conduct
• 2002 to 2014

• Nature of Business
• Petróleo Brasileiro S.A. – Petrobras (“Petrobras”) is a Brazilian government-controlled oil and gas company. Petrobras’ stock is registered with the Securities and Exchange Commission under Section 12(b) of the Exchange Act and trades on the New York Stock Exchange as American Depositary Shares (“ADSs”). Petrobras is headquartered in Rio de Janeiro, Brazil.

• Influence to be Obtained
• According to the SEC, Petrobras’ senior executives rigged the bidding process for numerous major infrastructure projects in favor of certain contractors, which included providing insider information. They inflated the cost of the contractors’ projects and received kickbacks worth one to three percent of the contract’s value. The Petrobras executives also received bribes from companies that did not go through the bidding process in an effort to win contracts. The executives kept a portion of the corrupt payments and passed along a portion to Brazilian politicians and political parties that helped the executives secure their positions at Petrobras.
   
  Petrobras filed false statements with the SEC—including in connection with its $10 billion ADSs offering in 2010. The preparation for the filing of the 2010 offering included materially false and misleading information and documents about Petrobras’ assets (which were overstated as a result of the inflated contracts). Petrobras also filed annual reports with the SEC that had inaccurate financial statements and omissions about the nature of the executives’ relationships with various interested parties.
   
  According to the SEC, the Petrobras failed to implement internal controls and keep accurate books and records. Petrobras failed to train employees on anti-corruption and anti-fraud compliance, lacked protocols to deter influence by politicians, and lacked procedures to ensure candidates for senior roles were free of potential conflicts of interest.

• Enforcement
• The SEC settled its enforcement action against Petrobras on September 27, 2018 for violations of the FCPA’s internal controls and books-and-records provisions, as well as violations related to misstatements in its SEC filings. Petrobras agreed to pay $933,473,797—consisting of $711,000,000 in disgorgement and $222,473,797 in prejudgment interest. This amount will be reduced by any payment made to the class action Settlement Fund in the matter of In re Petrobras Securities Litigation, No. 14-cv-9662 (S.D.N.Y.).
   
  Petrobras also agreed to pay a monetary penalty of $853,200,000, ten percent of which will be paid pursuant to the non-prosecution agreement Petrobras entered into with the DOJ. Petrobras will also receive credit for up to $682,560,000 for any payment it makes to Brazilian authorities in connection with this matter.

• Amount of the Value
• Approximately $1 billion.

• Amount of Business Related to Payment
• Not stated.

• Intermediary
• None.

• Citizenship of Parent Entity
• Brazil

• Total Sanction
• $ 933,473,797

• Compliance Monitor
• No

• Reporting Requirements
• No

• Case is Pending?
• No

• Total Combined Monetary Sanction
• $ 1,786,673,797

• Related Enforcement Actions
• In re Petróleo Brasileiro S.A. – Petrobras (2018)
  

• Cooperating Foreign Enforcement Agencies
• Brazil

• Industries
• Energy

• Regions
• Latin Amer. & Carib

Petróleo Brasileiro S.A. – Petrobras

• Citation
• In the Matter of Petróleo Brasileiro S.A. – Petrobras, Admin. Proc. File No. 3-18843 (Sep. 27, 2018).

• Date Filed
• 09/27/2018

• Filed Under Seal
• No

• FCPA Statutory Provision
• • Books-and-Records
  • Internal Controls

• Other Statutory Provision
• Sections 17(a)(2) and 17(a)(3) of the Securities Act; Section 13(a), and Rules 13a-1 and 12b-20 of the Exchange Act.

• Disposition
• Cease-and-Desist Order, Cease-and-Desist Order

• Defendant Jurisdictional Basis
• Issuer

• Defendant's Citizenship
• Brazil

• Individual Sanction
• $933,473,797