Bill Gates Foundation Sues Petrobras and PwC Brazil Over Corruption Scandal

Strategic Insights -

The Bill & Melinda Gates Foundation, along with the WGI Emerging Markets Fund, has filed a lawsuit against Petrobras and PricewaterhouseCoopers Auditores Independentes, alleging that the Brazilian oil giant and its auditor misrepresented their financial situation and operations, leading to investment losses. The suit claims that Petrobras executives colluded with construction companies to overbill the state oil giant, with kickbacks and political payoffs going to executives, politicians, and parties, including the ruling Workers' Party. The foundation is seeking unspecified damages and has accused PwC of ignoring red flags and endorsing the integrity of Petrobras' financial reports.

Key Takeaways:

  • The Bill & Melinda Gates Foundation and the WGI Emerging Markets Fund have filed a lawsuit against Petrobras and PricewaterhouseCoopers Auditores Independentes, alleging corruption and misrepresentation of financial information.
  • The suit claims that Petrobras executives colluded with construction companies to overbill the state oil giant, with kickbacks and political payoffs going to executives, politicians, and parties, including the ruling Workers' Party.
  • The scam is estimated to have cost Petrobras over $2 billion and has tainted the tenure of President Dilma Rousseff, who has faced rising talk of impeachment.
  • PwC is accused of ignoring red flags and endorsing the integrity of Petrobras' financial reports, despite knowing about the corrupt practices.
  • The lawsuit is the latest development in a growing scandal that has led to the conviction of a former treasurer of the ruling party, who was sentenced to 15 years in prison for receiving bribes from Petrobras contractors.

Statistics:

  • Over $80 billion of Petrobras' contracts were infected by the kickback scheme, representing one-third of its total assets.
  • The scam cost Petrobras an estimated over $2 billion.
  • Petrobras" own admission revealed the fraud went on for years.
  • 15 years is the prison sentence given to a former treasurer of the ruling party for receiving bribes from Petrobras contractors.

Sources:

*

" The depth and breadth of the fraud within Petrobras is astounding. By Petrobras's own admission, the kickback scheme infected over $80bn of its contracts, representing one-third of its total assets," the suit alleged.

  • Prosecutors in Brazil say Petrobras executives colluded with construction companies to massively overbill the state oil giant."
  • Portfolio managers for Gates and WGI probed Petrobras executives on questionable financial data, but were misled in a "series of materially false and misleading written and oral statements and/or omissions by Petrobras and/or PwC," according to the complaint.
  • The largest company in the world's seventh-largest economy has estimated the scheme cost it more than $2bn.