Scandal-hit Petrobas pledges better corporate governance

Scandal-hit Petrobas pledges better corporate governance

Monday, November 17, 2014 11:30 pm

Petrobras Headquarters in Brazil

Petrobras Headquarters in Brazil

Brazil’s state-owned oil giant Petrobras vowed Monday to do a better job policing itself, as it struggles to cope with the fallout of a huge corruption scandal.

Despite the pledge, Petrobras shares plunged five percent by the close in Monday trading and are down about a fifth so far this year, wiping billions of dollars off the firm’s market value.

A detained former Petrobras director has told investigators that the firm paid millions of dollars to politicians and members of the ruling Workers Party between 2004 and 2012 to buy influence with cash creamed off from inflated contracts.

Federal police over the weekend interviewed 23 people arrested on suspicion of corruption and money-laundering, including top executives from some of Brazil’s biggest construction firms, in a widening scandal.

Petrobras CEO Graca Foster said the company would create a compliance division tasked with tracking “internal processes.”

“We are working intensely to shore up our internal processes,” Foster told a news conference.

Brazil’s President Dilma Rousseff says she had no knowledge of the massive kickback scheme, even though senior members of her ruling Workers Party have been linked to it.

Foster said the Petrobras board had given her unanimous backing to take all necessary steps, including the creation of the compliance directorate, to improve corporate governance in the wake of the scandal.

Last week, the ongoing investigation forced the company, which has brought in external financial consultants to probe the allegations, to postpone release of third-quarter earnings.

Foster and director of finance Almir Barbassa said Monday that if graft accusations are confirmed they will have an impact on the results, which now are not expected before December 12.

Nobody has been convicted over the allegations but there have been dozens of arrests and detained director Paulo Roberto Costa is set to stand trial.

“We are working as hard as we can to ready the earnings report,” said Barbassa, who stressed Petrobras would cooperate fully with investigators “to ensure the matter is resolved quickly.”

O Estado de Sao Paulo daily meanwhile reported that former Petrobras director Pedro Barusco had reached a plea bargain agreement with investigators by offering to reveal what he knows — while also pledging to return $100 million.

The paper said $20 million held in a Swiss bank account had been blocked.

Also Monday, Petrobras cut its production growth target for this year from 7.5 percent to 5.5-6.0 percent owing to platform delivery delays and licensing processes.

Rousseff, a former Petrobras board chair, said after the G20 summit in Brisbane that the investigation could “change Brazil forever” by ending a culture of impunity.

Rousseff said she welcomed the first “concrete investigation into corruption in Brazil, in either the public or private sectors” and pledged to review all contracts signed between Petrobras and large construction companies suspected of corruption in an affair dubbed “Operation Car Wash.”

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