US probe could cost Petrobras $1.6bn

Rio De Janeiro and New York BRAZIL’S Petroleo Brasileiro (Petrobras) might need to pay record penalties of $1.6 billion (R20.7bn) or more to settle US criminal and civil probes into its role in a corruption scandal, a person recently briefed by the company’s legal advisors said.

State-run Petrobras expected to face the largest penalties ever levied by US authorities in a corporate corruption investigation, according to the person, who has direct knowledge of Petrobras’s thinking. The settlement process could take two to three years, this person said.

To date, the largest settlement of corporate corruption charges with the US Department of Justice (DOJ) and the US Securities and Exchange Commission (SEC) was a 2008 agreement with Siemens, the German industrial giant. It agreed to pay the US $800 million to settle charges related to its role in a bribery scheme, and paid about the same amount to German authorities.

The person said the legal advisors said they believed Petrobras faced fines that could be as large as, or more than, the $1.6bn in combined US and German penalties that Siemens faced.

Two other sources with direct knowledge of Petrobras’ plans also said that any settlement, while several years away, would likely be “large”, but did not give a specific estimate.

Early stages

All three sources requested anonymity and cautioned that any estimates for the size of possible fines were very preliminary. Petrobras had not yet begun settlement talks with US authorities, whose investigations were believed to be in an early phase, they said.

In November, the SEC sent a subpoena to Petrobras requesting information about the widening corruption investigations that ensnared top company executives, major private contractors and senior politicians in Brazil. According to people familiar with the matter, the DOJ, which can bring criminal charges, is also investigating the company.

Petrobras’ lawyers maintain that the firm was a victim of corruption and bid-rigging by engineering firms and other suppliers, a group of former employees who allegedly took or arranged bribes, and Brazilian politicians who benefited from kickbacks from Petrobras suppliers, according to Petrobras officials.

However, the attorneys also believed that investigations by US authorities were likely to result in charges that Petrobras itself violated the US Foreign Corrupt Practices Act and securities laws, according to the person who was briefed.

Petrobras falls under US jurisdiction because its shares are traded in the US. – Reuters