MercoPress. South Atlantic News Agency

Petrobras faces legal challenges in the billions from international investors

U.S. District Judge Jed Rakoff in Manhattan certified two classes of plaintiffs, saying their claims are similar enough to be pursued as groups.

Brazil’s troubled state oil firm Petrobras faces possible new legal challenges from a coalition of groups representing international investors based in Europe in the US. The financially hobbled and corruption-racked company is being sued over alleged fraud-related losses the investors suffered on its shares and bonds traded outside the Americas.

 In a decision made public U.S. District Judge Jed Rakoff in Manhattan certified two classes of plaintiffs, saying their claims are similar enough to be pursued as groups. One class bought various Petrobras securities from January 2010 to July 2015 and will be led by Universities Superannuation Scheme of Liverpool, England.

The other bought debt securities from offerings in 2013 and 2014, and will be led by North Carolina's treasurer and the Employees' Retirement System of Hawaii.

“Petrobras was a massive company with investors around the globe,” Rakoff wrote in a 49-page decision. “Notwithstanding Petrobras's size and its numerous and far-flung investors, the interests of the class members are aligned and the same alleged misconduct underlies their claims.”

Class certification can make it easier for investors to recoup larger sums than if they sued individually, though it does not guarantee they will be recover. Other defendants include more than a dozen bank underwriters and an affiliate of the auditor PricewaterhouseCoopers.

Petrobras has been accused of inflating the value of more than US$98 billion of its stock and bonds through years of corruption. Last April, Petrobras took a US$17 billion write down to account for overvalued assets.

Prosecutors have also said more than US $2 billion of bribes were paid over a decade, mainly to Petrobras executives from construction and engineering companies. The scandal has contributed to a plunge in Petrobras' market value to below US$20 billion from nearly US$300 billion fewer than eight years ago.

Rakoff appointed the law firm Pomerantz LLP to represent both investor classes. It would share in any recoveries.

Petrobras' fraud “has eviscerated billions of dollars in shareholder value, as well as hobbled the political and economic structure of Brazil,” Jeremy Lieberman, a Pomerantz partner, said in a statement. “Today's ruling represents a significant milestone in Plaintiffs' efforts to recoup a significant portion of the losses incurred.”