The Southern District of New York court on 2 February 2016 granted Universities Superannuation Scheme Limited (USS) motion for class certification in the action against Petróleo Brasileiro S.A. – Petrobras (Petrobras).
USS is acting as class representative on behalf of investors who allege securities fraud violations stemming from a large-scale bribery and money-laundering scheme that caused tens of billions of dollars in damages.
Judge Rakoff certified a class of investors who acquired Petrobras securities between 22 January 2010 and 28 July 2015, who may now pursue their claims under the US Securities Exchange Act of 1934. He also certified a class of investors who acquired debt securities issued by Petrobras or Petrobras International Finance Company S.A. through public offerings on 15 May 2013 and 11 March 2014.
The court’s acceptance that the class period for purchasers of securities should be extended by four months to 28 July 2015, is important as it calls into question the accuracy of Petrobras’ reported $2.5 billion impairment charge related to the fraudulent bribery scheme and illegal contract overpayments. Petrobras opposed extending the class period on the grounds that it was unreasonable for investors to rely on earlier fraudulent financial statements. In his decision, Judge Rakoff wrote: “In effect, Petrobras is arguing (rather remarkably) that its own estimate of $2.5 billion in losses was so outlandishly incorrect that the market and investors in its securities should have known better than to rely on it.”
With respect to appointing Pomerantz as class counsel, the order states: “On the basis not only of USS’s counsel’s prior experience but also the Court’s observation of its advocacy during the many months since it was appointed lead counsel, the Court concludes that Pomerantz, the proposed class counsel, is ‘qualified, experienced and able to conduct the litigation.’”
Jeremy Hill, Group General Counsel, USS, said:
“The fraudulent actions of Petrobras executives have caused significant losses to investors worldwide, many of whom are responsible for the pensions or long-term savings of large numbers of individuals. As lead plaintiff we therefore welcome the court’s decision, which will allow these claims to continue as a class action.”
Jeremy Lieberman, partner at Pomerantz, Lead Counsel for the Class, said:
“We are very pleased with the Court’s ruling granting Lead Plaintiff’s Motion for Class Certification. The fraud conducted by Petrobras during the Class Period has eviscerated billions of dollars in shareholder value, as well as hobbled the political and economic structure of Brazil, one of the world’s largest economies. Today’s ruling represents a significant milestone in Plaintiffs’ efforts to recoup a significant portion of the losses incurred by Defendants’ unprecedented scheme.”