Petrobras non-prosecution agreement and SEC settlement (2018)

The non-prosecution agreement

The agreement is a letter from the DOJ Fraud Section and the U.S. Attorney's Office for the Eastern District of Virginia, dated 26 September 2018 ². It was signed for Petrobras by its general counsel and its outside counsel ². DOJ announced it on 27 September 2018 ¹.

DOJ resolved the case by a non-prosecution agreement, and no criminal charge against Petrobras is described in the release or the agreement ^1,2. The company "admits, accepts, and acknowledges that it is responsible under United States law" for the acts of its officers, directors, employees and agents described in the statement of facts ². It agreed that the facts "constitute a violation of law," naming the Foreign Corrupt Practices Act ².

The conduct described

DOJ said Petrobras admitted that it "failed to make and keep books, records and accounts that accurately and fairly reflected" its capitalisation of property, plant and equipment ¹. DOJ said certain executives "signed false Sarbanes-Oxley (SOX) 302 sub-certifications" ¹. The statement of facts says Petrobras "violated all of the elements of the books and records and internal controls provisions" ².

Assistant Attorney General Brian A. Benczkowski said "Executives at the highest levels of Petrobras" facilitated bribes to Brazilian politicians and political parties and "cooked the books" ¹.

The SEC said it estimated an overstatement of assets of about US$2.5 billion ³. It referred to a US$10 billion stock offering to US investors in 2010 ³. SEC Co-Director of Enforcement Steven Peikin said "If an international company sells securities in the United States, it must provide truthful information" ³.

Money: the penalty and the split

The agreement sets a total criminal penalty of US$853,200,000 ². DOJ said this reflects a 25% discount off the low end of the Sentencing Guidelines fine range for "full cooperation and remediation" ¹. Petrobras did not voluntarily disclose the conduct ¹.

• The US share was due within five business days of full execution ².
• If Petrobras misses payments to Brazil, the unpaid amount becomes payable to the U.S. Treasury ².
• Petrobras was to resolve separately with Brazilian authorities and be subject to their oversight ².

The SEC settlement

The SEC announced a settlement on 27 September 2018 under SEC order 33-10561 ³. It required US$933 million in disgorgement and prejudgment interest and an US$853 million civil penalty ³. DOJ gave the disgorgement and interest figure as US$933,473,797 ¹. The disgorgement is offset by certain payments to investors under the class action In re Petrobras Securities Litigation in the Southern District of New York ^1,3. The penalty is offset by penalties paid to Brazilian authorities ³.

The SEC release does not state whether Petrobras admitted or denied the SEC's findings ³. The SEC order was not reviewed for this page.

Status

The agreement runs for three years from execution and may be extended by up to one year ². No independent monitor was required ². Petrobras agreed to file an initial compliance report within one year and two follow-up reviews, the second at least 30 days before the term ends ². The agreement says the reports are intended to remain non-public ². No DOJ document confirming the end of the term was reached, so this page does not report it.