April 5, 2015 1:41 am
Petrobras scandal prompts wave of investor lawsuits
Petrobras is being sued for losses suffered as a result of bribery alleged to have taken place at the company between 2004 and 2012
One of Sweden’s largest investors has pledged to take direct legal action against Petrobras, becoming the third large investor to seek damages individually from the Brazilian oil group.
The $30bn AP1 pension fund plans to sue Petrobras separately from an existing class action lawsuit after revelations of a multibillion-dollar corruption scandal at Brazil’s biggest company by sales.
A spokesperson for AP1, which held 3.7m of Petrobras shares at the end of December, told FTfm: “We have opted out from the class action and intend to have our own process against the company.”
In the past two weeks, Dimensional Fund Advisors, the US fund house, and six New York City pension funds also opted out of the class action to sue Petrobras for losses suffered as a result of bribery alleged to have taken place at the company between 2004 and 2012.
A spokesperson for Dimensional said: “We, along with several other funds, have decided to take action against Petrobras. Usually we do this by joining a class-action suit. This time we thought it in our shareholders’ interest to pursue our claims directly.” Investors may secure better settlement terms by pursuing a claim seperately to a class action, according to several lawyers.
The investor suits, which have been filed in the New York court system, claim that the company misstated the value of its assets and made misleading statements about its anti-corruption policies and internal financial reporting controls. Petrobras stock was consequently sold at artificially inflated prices, according to the legal filings.
Petrobras’s share price dropped 43 per cent last year. The company declined to comment.
Several European pension funds that invested in Petrobras are also assessing their legal options.
A spokesperson for AP3, the second largest of the five Swedish government pension funds, with $33bn of assets, told FTfm: “[We] have not yet decided to join any class action suits against Petrobras. However, we will make sure we receive our eventual share of [any] settlement.”
The $20bn AP7 fund confirmed it owns 3.3m Petrobras shares worth €10m but said it “has not planned any class action lawsuit”.
Nick Butler, visiting professor at King’s College London and former vice-president for policy at BP, the UK energy company, believes the investors “have a very strong case”. “The investor relations statements from the company over several years have clearly been misleading,” he said.
Simon Hart, a partner at RPC, the law firm, added: “The underlying facts about the bribery allegations seem to be well advanced in terms of being admitted or evidenced.”
However, David Seidel, chief executive of the Institutional Investors Tort Recovery Association, which helps institutions decide which class actions to join, was more circumspect. He said: “There are some very serious allegations that have to be addressed and this is probably the biggest corruption trial I have seen. How that resolves itself is another question.”
Dozens of US pension funds have filed lawsuits against Petrobras since December. Last month the claims were consolidated into one group class action with the Universities Superannuation Scheme, the £40bn UK pension fund, selected as the lead plaintiff.
Union Investment, the German asset manager, and the Hawaiian state pension fund were named as additional plaintiffs in the suit. USS has claimed that it lost $84m as a result of the Petrobras turmoil.
ABP, the largest Dutch pension fund, and PGGM, which holds 0.8 per cent (€61.5m) of Petrobras stock, confirmed they were participating in the class action.
Additional reporting by Joe Leahy
Copyright The Financial Times Limited 2015