Petrobras asks judge to throw out investor suits

PETROLEO Brasileiro (Petrobras) was heading into a Manhattan courtroom yesterday to ask a judge to throw out investor lawsuits triggered by the multibillion-dollar bribery scandal that was rocking Brazil’s economy and its political elite.

Less than a week after police detained the chief executives of Brazil’s two biggest builders in connection with the kickback probe, the state-owned energy giant is asking that the investor cases be dismissed. It said that it had been swindled by renegade employees who had traded construction contracts for pay-offs.

The investors, led by an England-based pension fund, claim the scandal helped knock tens of billions of dollars off Petrobras’s market value.

Eight suits filed on behalf of stock and bond investors have been bundled before US District Judge Jed Rakoff for preliminary matters, including the effort by Petrobras to have them thrown out.

The investors want compensation for losses, plus damages from Petrobras for allegedly issuing misleading financial statements and overstating the quality of internal controls.

In seeking dismissal, Petrobras argued that it was victimised by a “criminal cartel of Brazil’s largest construction and engineering companies”, and “rogue politicians” who stole its assets.

Erik Gordon, a professor at the University of Michigan Ross School of Business, said that could be a tough story to sell Judge Rakoff.

“Petrobras might find it difficult to convince him that all the misconduct it alleges it is a victim of is likely to have happened without it at least questioning the goings-on,” Gordon said. – Bloomberg