PETROBRAS INVESTOR ALERT: $3B Settlement Covers Only US Securities. Majority of International Investors and Losses Not Covered
Stichting Petrobras Compensation Foundation (SPCF or Foundation).
On January 3, 2018, Petrobras announced that in connection with the losses investors suffered from the “Lava Jato” bribery scandal, it had agreed to a USD 2.95 Billion settlement with investors who purchased American Depository Shares (ADS) and bonds in the US. The US settlement is a commendable and positive development, but it only provides recoveries for claims by purchasers in the United States and by purchasers of Petrobras securities that are listed for trading in the United States. The US issued and traded securities represent a limited portion of Petrobras global securities and related investor losses. The majority of investor losses occurred from trading in the Petrobras securities including Preferred and Common shares traded on the Brazilian exchange in São Paulo, European-regulated exchanges and bonds issued by Petrobras Global Finance, which is headquartered in the Netherlands, not in Brazil. The underlying fraud and events are the exact same and Petrobras should treat its investors equally. Petrobras should therefore compensate its investors regardless of which exchange, or in which country, they purchased Petrobras shares or bonds.
In January 2017, SPCF, backed by a coalition of international investors and law firms, started legal action against Petrobras and filed a Writ of Summons in District Court in Rotterdam, seeking declaratory relief for global investors who purchased Petrobras securities in non-US markets or on non-US exchanges.
The litigation in the Netherlands covers the principal Petrobras equity securities that traded on the BOVESPA exchange in São Paulo and via linked markets such as Latibex on Bolsa De Madrid. The litigation in the Netherlands also covers the claims of bondholders whose losses are not included in the US litigation.
A case management hearing took place on August 23, 2017 at the District Court in Rotterdam. Parties are now litigating preliminary issues. The focus of the case is expected to shift to the merits in the Summer of 2018. Any judgment issued by the court in favor of the Foundation, or any earlier settlement with the Foundation relating to investments in international securities (non-US securities), would be enforceable at least throughout Europe.
The Dutch litigation is a result of significant investigations and planning and was formalized in February 2016 by SPCF supported by a coalition of international investors, law firms, litigation funders and investor interest groups, to litigate against Petrobras with the goal of reaching a global binding resolution. The Foundation board is composed of prominent independent legal and finance expert directors, including a former Justice Secretary for the Dutch government and the Foundation’s Chairman Mr. H. TH. (Dick) Bouma, a former Justice at the Court of Appeals in The Hague.
The Foundation has significant support from institutional investors from around the world, including investors in the US, UK, Brazil, Netherlands, France, Germany, Spain, Italy, Nordic countries, Japan and others. Individual institutional investor losses range in the millions, tens of millions and in some instances close to USD 100 million. Investors have signed Foundation support and contingency success fee funding agreements, supporting and demonstrating their desire to pursue restitution for the losses they unfairly and unexpectedly suffered as a result of the illegal acts of Petrobras.
Many of Petrobras’ activities are structured via various entities in the Netherlands (Rotterdam). Petrobras also raises debt capital from investors via its Dutch subsidiary, Petrobras Global Finance B.V. (PGF), headquartered in Rotterdam (not in Brazil). Petrobras has issued an unconditional guarantee towards the debenture holders for the fulfillment of PGF’s obligations. Providing additional nexus to the Netherlands, the Petrobras corruption scandal reached into Holland via a Dutch listed company, SBM Offshore, that allegedly bribed Petrobras executives and ultimately settled with Dutch regulators for USD 240 million, the largest anti-corruption settlement in Dutch corporate history. Petrobras continues significant operations in the Netherlands to this day. Ultimately, the Dutch Collective Settlement Act (WCAM) is a framework that would permit Petrobras to obtain global peace with damaged investors.
Jurjen Lemstra, Partner at Lemstra Van der Korst – the leading law firm representing the Petrobras investors in the Netherlands – commented “Petrobras investors seeking to prosecute claims in Brazil cannot expect an adequate and fair trial, amongst others because the Brazilian system is one with many conflicts of interest. With strong nexus for this case in the Netherlands, the Dutch court system is the optimal international legal environment for the litigation against Petrobras, amongst others because Dutch courts have historically ruled favorably for Foundations representing shareholders, such as SPCF, in large multinational securities fraud collective actions.”
In the past, Petrobras promoted that European investors could elevate their confidence in the Company and its compliance, when it became subject to European regulators, including the Spanish financial markets regulator CNMV, in connection with various arrangements, including its linked-market arrangement with European exchanges, such as Bolsa Madrid, to trade and freely transfer its securities (same securities Cusip/ISIN as traded in Brazil) in custody between Brazil and Europe.
Investors that are interested in joining the action can contact ISAF, the administrative support agent and funding organizer for SPCF at firstname.lastname@example.org
Global Coalition Information
Foundation. Stichting Petrobras Compensation Foundation (SPCF) is a Netherlands-based foundation that acts on behalf of damaged Petrobras investors who purchased securities on markets outside of the United States. More information about the Foundation can be found at www.pbcompensation.com
Contingency Investor Funding. SPCF has appointed International Securities Associations & Foundations Management Company for Damaged Petrobras Investors (Bovespa) Ltd. (ISAF) to coordinate with investors. ISAF has organized the funding of all litigation costs so that investors can participate with no upfront cost. More information about ISAF can be found at www.isafmanagement.com
Law Firms. Lemstra Van der Korst N.V., a leading Dutch litigation and class action law firm (Netherlands), acts on behalf of the Foundation and is consulting with securities litigation firms, Motley Rice LLC (US), Lowey Dannenberg Cohen & Hart, P.C. (US), Withers LLP (UK) and certain Brazilian law firms.
Claims Analysis and Processing. Battea Class Action Services, LLC, an international leader in class and collective action damages evaluations securities claims filings, has been retained to collect client data and process and validate investor losses. More information about Battea can be found at www.battea.com
More information can be found on: www.lvdk.com