Petroleo Brasileiro S.A. - Petrobras ("Petrobas") was a Brazilian state-owned-and-controlled oil and gas company that operated in 18 other countries, including the United States. The Brazilian government directly owed approximately 50.26% of Petrobras's common shares, and the Brazilian Economic and Social Development Bank controlled an additional 9.87% of its common shares. Petrobras's common and preferred stock was registered with the SEC and traded on the New York Stock Exchange.
According Petrobas annual reports filed with the SEC, "[i]n 2009, the Brazilian federal police began an investigation called 'Lava Jato' (Car Wash) aimed at criminal organizations engaged in money laundering in several Brazilian states. The Lava Jato investigation is extremely broad and involves numerous investigations into several criminal practices focusing on crimes committed by individuals in different parts of the country and sectors of the Brazilian economy. Beginning in 2014, and over the course of 2015, the Brazilian Federal Prosecutor’s Office focused part of its investigation on irregularities involving Petrobras’s contractors and suppliers and uncovered a broad payment scheme that involved a wide range of participants, including former Petrobras personnel.
Based on the information available to Petrobras, the payment scheme involved a group of companies that, between 2004 and April 2012, colluded to obtain contracts with Petrobras, overcharge the Company under those contracts and use the overpayment received under the contracts to fund improper payments to political parties, elected officials or other public officials, individual contractor personnel, former Petrobras personnel and other individuals involved in the scheme. Petrobras refers to this scheme as the 'payment scheme' and to the companies involved in the scheme as 'cartel members'.
In addition to the payment scheme, the investigations identified several specific instances of other contractors and suppliers that allegedly overcharged Petrobras and used the overpayment received from their contracts with the Company to fund improper payments, unrelated to the payment scheme, to certain Petrobras employees, including the former Petrobras personnel. Those contractors and suppliers are not cartel members and acted individually. Petrobras refers to these specific cases as the 'unrelated payments.'
In its October 27, 2014 6-K report, Petrobas disclosed that it has taken many steps to examine the facts in the Lavo Jato investigation, including setting up internal investigative committes "to examine evidence or facts perpetrated against the company, as well as to assist administrative measures and resulting procedures." Petrobas is working with independent Brazilian and U.S. law firms that were hired to conduct an independent internal investigation.
On November 21, 2014, Petrobas received a subpoena from the SEC requesting certain documents and information about the company relating to, among other things, the Lava Jato investigation and any allegations regarding a violation of the U.S. Foreign Corrupt Practices Act. The DOJ is conducting a similar inquiry, and Petrobas has disclosed that it is voluntarily cooperating with both investigations.
On November 27, both the DOJ and SEC announced a global settlement with Petrobras. Under the terms of the settlement, Petrobras agreed to pay approximately $1.7 billion to resolve the FCPA investigation into the company. Approximately $170 million was paid to the DOJ and SEC, $683 million to Brazilian authorities, and the remainder was disgorgement that was credited against a large settlement in a securities class action filed against the company.
