Brazil’s state-owned oil giant, Petróleo Brasileiro S.A., or Petrobras said it will pay a total of $768 million in settlements and compensation for the Car Wash scandal.
Petrobras said in a statement that has reached coordinated resolutions of investigations by the U.S. Department of Justice and the U.S. Securities and Exchange Commission related to the company’s internal controls, books and records, and financial statements during the period from 2003 to 2012.
Petrobras said it will enter into an agreement with the Brazilian Federal Prosecutor´s Office, Ministério Público Federal, as the underlying facts were uncovered in the investigation by the Brazilian authorities in Operation Car Wash, enabling 80 percent of the associated payments to be invested in Brazil.
The separate agreements fully resolve the investigations of U.S. authorities. Under the agreements, Petrobras will pay US$85.3 million to the DOJ and the same amount of US$85.3 million to the SEC. The agreements also credit Petrobras’s remittance of US$682.6 million (80 percent of the resolution amount) to the Brazilian authorities to be deposited by Petrobras into a special fund and used according to a consent agreement that will be signed with the MPF.
Through Operation Car Wash, Brazilian authorities, including the Brazilian Supreme Court, have affirmed that certain former Petrobras executives and others engaged in a corrupt scheme that harmed and caused severe financial loss to Petrobras. Petrobras has already recovered more than R$2.5 billion in restitution in Brazil and will continue to pursue available legal remedies from all culpable companies and individuals. Under these agreements, DOJ also recognizes Petrobras’s status as a victim of the embezzlement scheme and the SEC recognizes the company’s status as an Assistant to the Prosecutor in more than 50 criminal proceedings in Brazil.
The agreements that constitute this resolution are as follows:
• A non-prosecution agreement with the DOJ under which Petrobras accepts responsibility under U.S. criminal law for the acts of certain former Petrobras executives and officers that gave rise to violations of books and records and internal controls provisions under Title 15 of the United States Code, section 78m. None of those individuals remain employed by or associated with the company. The agreement acknowledges that, in addition to the misconduct described by the DOJ, the company was victimized by an embezzlement scheme that included the participation of former executives and officers of Petrobras.
• An agreement with the SEC resolving allegations that those same former executives committed violations of certain provisions of the Securities Act of 1933, as well as of the books and records and internal controls and false filings provisions of the Securities Exchange Act of 1934. These alleged violations, none of which require a finding of intent, resulted in misstatements and omissions in filings made with the SEC and in documents relating to a global public offering of equity securities in 2010. The SEC agreement limits the company’s admissions to those facts related to the DOJ agreement.
• A consent agreement to be signed with the MPF without attribution of liability to the company under Brazilian law. The agreement provides that US$682.6 million will be deposited by Petrobras into a special fund in Brazil to be used in strict accordance with the terms and conditions of the consent agreement, including for various social and educational programs to promote transparency, citizenship and compliance in the public sector.
The resolution is in Petrobras’s best interest and that of its shareholders. It puts an end to the uncertainties, risks, burdens and costs of potential prosecution and protracted litigation in the United States.
The SEC also recognized that the payments Petrobras already made under its previously announced settlement of a securities class action lawsuit in the United States will be credited to satisfy the payment of US$933.4 million. As a result, Petrobras will not make any additional payment to the SEC beyond the US$85.3 million referenced above.
The SEC and DOJ agreements also both recognize Petrobras’s compliance program, internal control and anti-corruption procedure enhancements. As part of its agreement with the DOJ, Petrobras has agreed to continue to evaluate and enhance these initiatives.
The company will recognize a provision of US$853.2 million, or an estimated R$3.6 billion, including taxes, in its financial statements for the third quarter of 2018.