Investor Claims Advanced Against Brazilian Bank in Bribery Soup

MANHATTAN (CN) – Senior executives of Brazil’s third largest bank will have to face a securities class action after a federal judge found that investors supplied enough information to accuse the lender of concealing its involvement in a sweeping corporate corruption scandal.

Accused of bribing Brazilian tax officials to reduce or avoid fines for tax evasion, Banco Bradesco was one of more than 70 companies targeted in a multiyear investigation by Brazilian authorities that led to indictments last year.

Bradesco CEO Luiz Carlos Trabuco Cappi was one of several bank officers charged with trying to avoid a tax fine worth more than $911 million, but a Brazilian court cleared the power broker of any wrongdoing in June.

By that point in New York, a shareholder class action had been pending against Trabuco and two other indicited Bradesco executives for a year.

Lead plaintiff Public Employees’ Retirement System of Mississippi allege that Bradesco’s 11-year bribery scheme began in 2004, but that bank executives relied on a series of false and misleading statements to reassure investors, cover up the investigation, and hide Bradesco’s weak internal controls.

U.S. District Judge Gregory Woods advanced certain aspects of the case on Friday, finding that the investors have adequately pleaded that that Bradesco personnel were aware of the bribery scheme in 2014.

“The court has little trouble concluding that, at least in signing off on the August 8, 2014, press release while allegedly participating in the bribery scheme, Abreu ‘participated in a fraud directed to deceiving United States shareholders,’” the ruling states, referring to Domingos Figueiredo de Abreu.

Woods did, however, dismiss claims related to statements made prior to 2014.  The class failed to adequately “allege that anyone at Bradesco was aware that they were involved in any unlawful dealings with government officials at least until March 24, 2014,” the 99-page opinion states

Woods emphasized that that Trabuco’s ducking of criminal charges in June “had no effect” on his review.

Banco Bradesco did not respond to an emailed request for comment.

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