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Thursday, July 18, 2024 | Back issues
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Petrobras Will Face Class in Shareholder Suit

MANHATTAN (CN) - A lawsuit against Petrobras for hiding a bribery scheme for years while selling $98 billion in securities can proceed as a class action for thousands of shareholders, a federal judge ruled.

More than a dozen lawsuits poured into the Southern District of New York late last year after the Securities and Exchange Commission said it was investigating Brazil's largest corporation over bribery allegations.

The consolidated class action led by the Liverpool-based pension fund Universities Superannuation Scheme (USS) places the class period between Jan. 20, 2010, to March 19 this year.

Shortly before the latest iteration of the lawsuit in March 2015, millions of Brazilians took to the streets to call for the impeachment of their president, Dilma Rousseff, who served as chairwoman of Petrobras between 2003 and 2010.

A corruption probe of thousands produced more than 40 indictments. The most recent conviction brought down the company's former director Jorge Zelada on Monday, the BBC reported.

On Tuesday, U.S. District Judge Jed Rakoff certified the consolidated lawsuit against the company into multiple class actions representing "thousands of class members, dispersed across the globe."

The judge appointed North Carolina, Hawaii, and USS as class representatives for claims under the Securities Act and the Securities Exchange Act, and allowed the Manhattan-based firm Pomerantz to serve as their counsel.

Petrobras argued that the hundreds of shareholders who filed "opt-out" individual actions against the company made class certification unfeasible.

For Rakoff, this argument ignored important context.

"The context of this particular case is that Petrobras was among the world's largest companies during the class period," he wrote in a 49-page ruling. "Hundreds of opt-outs is a large number, but a conservative estimate would place the size of the proposed classes in the thousands. Judicial economy will be served by a joint trial because of the similarities between the individual actions and the present action, but, contrary to defendants' suggestion, this would not extend to a joint trial for thousands upon thousands of individual actions."

Lead class counsel Jeremy Lieberman, a partner at Pomerantz, said the firm is "very pleased" with the ruling.

"The fraud conducted by Petrobras during the class period has eviscerated billions of dollars in shareholder value as well as hobbled the political and economic structure of Brazil, one of the world's largest economies," he said in an email. "Today's ruling represents a significant milestone in plaintiffs' efforts to recoup a significant portion of the losses incurred by defendants' unprecedented scheme."

Petrobras representatives did not immediately respond to email requests for comment.

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