minha conta a revista fazer logout faça seu login assinaturas a revista
piauí jogos


in English

The oil is theirs*

The story of the multi-billion-dollar lawsuit against Petrobras in the United States

Roberto Kaz | Edição 118, Julho 2016

A+ A- A

 versão em português

Translated by Christopher Peterson

Attorney André de Almeida remembers how cold it was in New York on Monday, December 8, 2014: “It was a freezing, blustery day, the kind you’d rather spend at home drinking hot tea.” He made a quick stop in the morning at Wolf Popper, the American law firm he had joined. “The plan had been to file the suit the week before, but we had to wrap up some details.” He grabbed lunch at a nearby bistro and decided to wait in his hotel until 4 PM, when the New York Stock Exchange closes. “We didn’t want to file before that, to avoid scaring the market.”

A half hour later he arrived at the 27-story building that houses the U.S. District Court of the Southern District of New York. He took off his wool suitcoat at the reception and handed his passport to security, where he was stopped by the metal detector because of a spiral notebook in his briefcase. After resolving the hitch, he entered the hall that features a statue of Justice, and from there he proceeded to the new claims division. “It was a waiting room with a counter, where the attorneys were called on first-come basis,” he tells. In his briefcase, a 38-page claim against Petrobras. “The brief had already been filed, minutes before, by internet,” he continues. “Anyone could have gone in my place to pick up the receipt, but I wanted to be there. It was an important case in Brazil’s legal history – and in my professional career.”

Almeida turned in the file, picked up the receipt, and caught the subway to Grand Central – a stately train station in Midtown Manhattan. From there he walked the fifteen minutes back to his hotel. “I was shaking, and checking my cell phone every minute because I knew the news was going to explode as soon as it came out.” He says he called his wife and said: “It’s started. Now hold on tight.” His phone soon began to ring.


Case number 14-cv-9662, currently under review in the New York Southern District Court, is a thick dossier of more than a thousand pages in which Petrobras is accused of cooking the books to hide “a multi-billion-dollar money laundering scheme”. The introduction, in English, was produced from July to December 2014 by Almeida’s team and the American firm Wolf Popper. Based on plea-bargaining depositions by former Petrobras executives Paulo Roberto Costa and Renato Duque, the case claims that the state-run oil company’s contracts were inflated – and that 3% of the value was siphoned off to politicians aligned with the Brazilian federal administration. Until 2015, such practice had never been brought to light in the company’s board reports. “Petrobras, directly or indirectly, engaged in a common plan, scheme, pursuant to which it knowingly or recklessly engaged in acts, transactions, practices and a a course of business which operated as a fraud ,” the dossier explains. “It made various false statements […] and employed manipulative or deceptive devices and contrivances in connection with the purchase and sale of adss,” the document continues, referring to the acronym for Petrobras securities traded on the New York Stock Exchange. Discovery of the scheme by the Operation Carwash task force – plus the hike in the dollar exchange rate, price controls on gasoline, and the drop in oil prices – shriveled the company’s market value from 300 billion to 100 billion dollars between 2010 and 2015. Thousands of shareholders were defrauded in the process.

Created in 1953 by Getúlio Vargas, Petrobras was a pureblood state-owned company until 1957, when it first launched part of it securities on the market. The massive opening of capital only occurred during Fernando Henrique Cardoso’s Administration: first in 1997, when 180 million shares were sold on the São Paulo Exchange, and later in 2000, when the company began trading its securities on the New York Stock Exchange. It had to issue American Depositary Shares (adss), the name for foreign companies’ securities traded in the United States. “Fernando Henrique’s idea was to make Petrobras an international company,” explained economist Adriano Pires, director of the Brazilian Center for Infrastructure, a consulting company specializing in the oil and gas market. More than twenty Brazilian companies, including Vale, Ambev, and Bradesco, currently trade adss. At Petrobras, ADSs represent 41% of the company’s publically traded capital.

The adss market works like this: first the company issues a specified number of shares in its home country, but leaves them frozen in its own treasury. Next it hires banks to distribute receipts for these shares in the United States. So an ADS is like “a mirror image of the original share,” says André de Almeida. Since the receipts are traded in the United States, the company is bound by the rules of the Securities Exchange Commission (sec), which oversees the U.S. capital market. The company thus becomes liable in the United States.

The trading session that marked Petrobras’ entry on the New York Stock Exchange in August 2000 featured Pelé, on a two-year contract to promote the Petrobras brand name outside of Brazil. “Petrobras is the Brazil that worked right, just like Pelé worked right,” the soccer star proclaimed at the time, justifying his contract. The first trading session attracted 13 thousand investors, who paid 2.6 billion dollars for the American shares. The internationalization plan had worked.

But the real turning point in the foreign market came in 2010. Four years earlier, already under Lula’s Administration, Petrobras had announced a massive oil discovery in the pre-salt offshore layer. To recover all that oil, a much more complex and expensive process, due to the great depth, required heavy investment. Petrobras scheduled a new public offering of 4 billion securities to raise the necessary funds. On September 24, President Lula, Vice-President José Alencar, Minister of Finance Guido Mantega, and Petrobras CEO José Sergio Gabrielli donned orange coveralls and white hardhats (the company’s uniform) to open the trading session at the São Paulo Exchange. At that moment, part of the new shares were already traded on the New York Stock Exchange.

Petrobras raised a total of 70 billion dollars with the offering, making it the second largest company in the Americas, next only to ExxonMobil in market value. The suit filed by André de Almeida in the United States dates the initial inventory of damages to shareholders precisely to the same year, 2010.


André de Almeida is a tall man of 42 years, with the easy-going speech of a native of Minas Gerais State. He has a law degree from the Catholic University of Minas Gerais and finished an extension course in the same field at Georgetown University. He lived in Washington DC for four years, working initially for the Organization of American States and later in a private corporate law firm.

In 2001, back in Brazil, he founded his own firm, Almeida Advogados. The firm now has 120 attorneys spread across São Paulo, Rio, Brasília, and Belo Horizonte. The headquarters in São Paulo occupies one of the top floors in a dark building on Avenida Brigadeiro Faria Lima. Almeida’s office looks out on the Jockey Club and Ibirapuera Park. His bookshelf features the Brazilian Civil Code and the book Oil: Money, Politics and Power in the 21st Century, on the history of British Petroleum. In the minibar, two bottles of Chandon, and on the wall, two frames – one with an illustration by Romero Britto and the other with a poster from the 1991 World Cycling Championship. “I was a two-time cycling champion before I took up law,” he explained.

Almeida said he began to consider the case in March 2014, when Operation Carwash was launched. He flirted with the idea for several months, before the plea bargaining deposition by former Director of Supply at Petrobras, Paulo Roberto Costa. “Up to that point there had been information on corruption and the company’s loss of market value, but the people involved, like Pedro Barusco, were just management-level. The discussion was whether Petrobras was a victim, or party to collusion.” Costa’s deposition changed the terms of the allegations. “He was a career executive. He was part of corporate governance. I was now certain of our position.”

Since Almeida was familiar with the American legal system, he thought the case would stand a better chance in the United States. “Brazil does not have any solid form of class action litigation. A class action suit can only be filed by a preexisting association. Such an association would have to be created, making the suit long and drawn-out, expensive, and unsuccessful,” he explained. “Besides, under Brazil’s prevailing Corporate Law, we would have to sue the controlling shareholder, in this case the Federal government. The lawsuit’s political implications would spill over to the courtroom.” So he opted to file in New York. “I had never actually filed a class action myself, but I had worked with such matters for years, while I was living in Washington.”

Class action is a form of group litigation available in the American system in which an individual who feels defrauded files a suit in the name of a group with which he shares an interest – in the case of a company, a shareholder who feels cheated can file suit in his own name and that of all the other minority shareholders. As for litigation costs, the mechanism benefits both the plaintiff and the defendant: a case that would otherwise unfold into dozens, hundreds, or thousands of independent claims ends up being consolidated into a single suit. The amount of damages, however, is a corporate nightmare.

“A class action award increases exponentially, depending on the number of group members,” wrote Brazilian jurist Antonio Gidi, professor at the University of Houston, in the book Class Action as an Instrument for Collective Protection of Rights. “The discrepancy between low litigation costs and high awards means that even a claim with limited chances becomes economically feasible for the group, and extremely dangerous for the defendant. The inequality between the parties persists, but now inverted; the defendant company is now at a disadvantage: no longer the oppressor, but the oppressed.”

This equation (combining low litigation costs with a potentially exponential award) means that class action litigation spawns a veritable industry, to the point where the plaintiff’s costs are covered entirely by the law firm representing him. “The client is a virtual figurehead,” Professor Gidi tells me over the phone. “The attorney owns the case, wielding almost life-or-death power in the U.S. legal system.” In other words, class action is not only a defensive mechanism but also a financial investment, in which law firms spend millions of dollars in the hopes of multiplying this amount several times over. The client only has to share the future gains with the lawyers in case of a favorable settlement or court award. In case of a defeat in court, the law firm bears the burden.

In 2015, 189 companies with securities traded on the NYSE were sued. In the first half of 2016 alone there were nearly a hundred. The class actions always end in a settlement between the parties, before coming to trial. Of the more than four thousand class actions filed to recoup shareholders’ losses in the last twenty years, not one came to trial. Even so, shareholders recovered 87 billion dollars in out-of-court settlements.


André de Almeida needed a local partner in order to file suit in the U.S. court. He presented the case to six firms during a string of trips to New York. “Since I was a former president of the Inter-American Bar Association, it was easy to schedule the meetings,” he told me. “But most of the firms laughed in my face at first, claiming it was impossible to sue Petrobras. They could not believe that the depositions would be allowed, or that the cases would prosper.” After several visits, five of the six firms ended up expressing interest. He opted for Wolf Popper, a medium-sized firm. “I had worked previously with two of the partners.”

Having sealed the deal, Almeida returned to Brazil to assemble the case. To keep all the information in order, he began taking all the most relevant notes on log books with black binding and A4 paper. On September 6 he wrote in a mixture of Portuguese and English: “Conference call with Emily [Madoff, attorney from Wolf Popper]. Several acts of corruption and arrests of 2 vps [referring to the arrests of Paulo Roberto Costa and Renato Duque in Operation Carwash]. Pricewaterhouse [Coopers, auditor of Petrobras] refuses to sign the balance sheet.”

He spent the month collating news clippings, reports, and transcriptions from depositions taken by the Brazilian Congressional Committee investigating Petrobras. On October 6 he noted: “I worked with Natalie [Yoshida, from his office] reading the newspapers to assemble the class action. Do not use the word ‘corruption’, to avoid being sued. I left the office at two in the morning.” Meanwhile, he began looking for investors in Brazil who had been hurt by purchasing Petrobras’ U.S. securities (a common practice is to purchase shares from the same company in both Brazil and the United States, for shareholders to hedge against currency fluctuations). At the end of the month he wrote: “I’m preparing my trip to New York next week. We already have six clients signed up, with losses in excess of 20 million dollars. It’s still not enough for class action.”

Two other Brazilian companies have faced class action suits in the United States. In 2011, meatpacking giant Sadia settled with shareholders for 27 million dollars to avoid charges of exchange fraud. The following year, paper and paper pulp corporation Aracruz paid 37.5 million. Both companies had been sued for hiding the risks they ran by investing in the derivatives market (years earlier, such investments had resulted in losses of hundreds of millions of dollars).

Calculation of the market value lost by Petrobras is complicated. The difficulty lies in distinguishing between what was eviscerated by corruption and the losses due to mismanagement, devaluation of the real, and falling oil prices. At any rate, as stated on page two of Almeida’s class action claim, “Authorities estimate that the bribery and money laundering scheme embezzled up to 28 billion dollars.”

Érica Gorga, a law professor at the Getulio Vargas Foundation in São Paulo and author of a study on the Sadia and Aracruz cases, has acted as expert consultant to the plaintiff in the Petrobras case. “The class action against Petrobras is more serious,” she says. “Aracruz is the Brazilian company that has paid the highest settlement to date. But the damage caused by Aracruz was 2.5 billion dollars, while Petrobras is ten times more.”

Gorga recalled that Sadia and Aracruz only came under civil litigation. “But Petrobras is also under investigation in other cases that may lead to multi-million-dollar fines.” She is referring to two investigations, one criminal, by the U.S. Department of Justice, and the other administrative, in the Securities and Exchange Commission (the much-feared sec), which slapped the German corporation Siemens with an 800-million-dollar fine in 2008.

Still, class action poses the greatest risk, as measured by financial loss. Eight years ago, Enron, the American energy giant, paid shareholders 7.2 billion dollars to settle a class action lawsuit (at the turn of this century the company’s CEO and main board members had decided to disguise the company’s financial losses, generating absolutely unreal balance sheets).

“The Petrobras case is worse than Enron in terms of losses,” said Érica Gorga. Consultant Adriano Pires added: “The Enron case caused huge damage, but the Petrobras case involves a number of imponderables besides money. Just think of what it can do to the company’s image.”


Retired accountant Peter Kaltman, a New York resident, is a specialist in the strange art of class action litigation. In 2001 he sued Scientific Atlanta, which manufactures television equipment. In 2004 he targeted Key Energy Services, a services provider to the petroleum industry. Two years later he filed against Sunterra, a hotel industry company. All three cases ended in out-of-court settlements. “He owns securities in various companies,” André de Almeida told me.

Kaltman was ground zero to the class action against Petrobras. In October 2014, with Operation Carwash already in full sway, the investor purchased a thousand Petrobras shares for 11 thousand dollars. Two months later he was represented by Almeida when the case opened. “The ideal thing is to begin the case on a small scale, to avoid exposing the funds,” the attorney explained to me. “You look for any shareholder who has a handful of shares. It works like bait for the market.”

The initial filing starts a 60-day period in which investors in similar straits appear before the court to compete for leadership of the case. Attorneys then begin courting individual investors and funds, anxious to find someone that has taken monumental losses. In general, the higher the shareholder’s loss, the better the odds that the judge will appoint him and his attorney to lead the class action. The winning law firm then defines the plaintiff’s strategy, representing all the shareholders, even those who have just lost the struggle for leadership.

Almeida was hopeful that the large Brazilian funds with American shares in Petrobras would join the class action. “I had a lot of meetings in those 60 days,” he told me. But on December 12, four days before the case opened, he wrote bitterly in his log book: “My partner went to btg and says that nobody in Brazil will have the guts to join the case.” Even so he scheduled a meeting with AMEC, the Brazilian Association of Capital Market Investors, representing banks and insurance companies with more than 400 billion reais invested on the stock market. He noted: “One of the banks at the meeting, Santander, likes the case, but thinks it won’t come to anything. The investors were skeptical and not the least bit sympathetic. I left there discouraged.”

“That conference room alone represented 40 billion reais in losses,” Almeida told me later in his office, recalling the scene at the AMEC headquarters in December 2014. “Itaú, Safra, btg, Bradesco, and hsbc were all there. If they joined [and led the suit], they would be free to call the shots in the case,” he shouted. “But they took a cowardly position, for fear of retaliation. Dilma had just been reelected.” He claims it was “the worst day” of his legal career.

On January 15, in a confessional tone, Almeida wrote in the log book that he still had hopes of leading the class action: “Not for economic reasons. I had spent my entire life preparing for the moment.” Two weeks later, however, he wrote that he was pessimistic: “My biggest loss has 20 million [dollars] at stake, and we don’t think it will be enough.” He says that meanwhile his office in Rio was invaded by a Petrobras employee. “He was screaming my name.” Somebody cut the telephone line in Almeida’s São Paulo office. “They sabotaged the wires, which are located on the ground floor. I went for ten days without a phone line.” He filed two complaints with the police. “I also hired personal security.”

On February 6, the 60-day deadline for shareholders to join the class action, several petitions were filed to lead the case.  One came from the Swiss bank Handelsbanken, with estimated losses of 21 million dollars. Another was from the German holding company Union Asset Management, claiming to have lost 29 million. The Ohio Public Employees Retirement System claimed 50 million dollars in losses. Meanwhile, the British fund Universities Superannuation Scheme estimated its losses at 84 million. The biggest losses were by Skagen-Danske Group, a conglomerate consisting of three banks from Norway and Denmark that claimed to have lost between 222 and 268 million dollars.

Almeida entered the contest representing two Brazilian investors, Roberto Gomes de Melo and Jacob Licht, with combined losses of slightly more than 2 million dollars. He wrote in the log book: “D Day. I can taste defeat. I don’t think it’ll work. Or will it?” When they discovered the discrepancy in relation to other investors’ losses, he and the lawyers from Wolf Popper turned the document in to the judge and announced that they were leaving the race. “The dream is over. We made the deal with other offices. We’re out. Game over,” he wrote in the log book.


In April this year, I was staying at a friend’s home in New York, where I had gone to interview some lawyers. One day my friend received a letter, possibly delivered to all the building’s tenants, announcing a recent settlement on a class action suit. “If you purchased supplements manufactured by Rexall Sundown, you are entitled to receive money from a class action settlement,” the letter said. The company, which sells vitamins and diet products, had just paid 9 million dollars to settle a claim that involved misleading advertising. Even someone who had never heard of the case was entitled to compensation, merely by completing a form.

“Everybody is represented in class action unless they opt out,” Érica Gorga explained to me. That is the source of class action’s tremendous firepower: it includes not only the people that have deliberately joined the claim (and who have done so with the sole objective of vying to lead the class action). It actually includes anyone and everyone that was defrauded by the defendant within a specified period.

The attorney that leads the case thus represents thousands of clients, not only the client that hired him. The attorney bears the litigation costs with an eye on the final award. In the Enron case, Coughlin Stoia Geller Rudman & Robbins, who led the case, received 10% of the settlement, or 688 million dollars (the plaintiff’s law firm normally keeps 25% of the settlement, but the percentage decreases as the total compensation increases).

Thus, starting on February 6, 2015, the deadline set by the judge for offices to join the case against Petrobras, the group members launched fierce struggle to determine who would lead the case. Lawyer Jeremy Lieberman from Pomerantz, representing the British fund Universities Superannuation Scheme, filed affidavits that technically disqualified the European group Skagen-Danske and the Ohio Public Employees Retirement System, its main rivals as measured by the size of losses.

The decision was announced on March 4. In a two-page brief, Judge Jed Rakoff ruled that the British fund represented by Lieberman would lead the class action. The choice was based on legal arguments (like the fact that Pomerantz had already led previous class actions) and monetary ones (the percentage charged, although not disclosed in the document, was lower than that of competing firms).

Lieberman learned of Rakoff’s decision through a phone call from his secretary. “I thought she was mistaken,” he told me. “We were dark horses. The Danes had lost a lot more money. And to top it off, I’d left earlier on the day of the oral arguments, because it was shabat.” Having confirmed that he was leading the case, he celebrated: “I felt the greatest.”


Jeremy Lieberman is a stocky Orthodox Jew with black hair and a stringy beard. He’s 40, has seven children, and lives in Queens, where his synagogue is also located. He has been with the Pomerantz office since 2004 and has worked on more than fifty class action suits. The largest, against a tech company called Comverse, resulted in a 225-million-dollar settlement six years ago. He was made partner.

The Pomerantz office occupies the 20th floor of a building with reflective glass in Midtown Manhattan and has sober décor and light-colored walls. On the waiting room table is a catalogue which reads that “the pioneering spirit” of founder Abraham L. Pomerantz lives on in cases like Petrobras, “one of the largest corruption and bribery scandals of the 21st century”.

Lieberman works in a surprisingly small and disheveled office. When I visited him in April, there was an umbrella on the floor and a picture frame leaning with the canvas against the wall. His dark hardwood desk was buried in papers and newspapers, nearly covering a plaque that read, “A Cluttered Desk is a Sign of Genius”.

It was noon on a Friday. I asked Lieberman if he had heard of the Petrobras case before December 8, 2014, when the initial claim was filed by André de Almeida. “No,” he admitted. “It was the end of the year, just before Christmas, and things were slow here in the office. At the time I didn’t appreciate the depth of the fraud, and didn’t know how deep the Brazilian government was involved.” He says he broached the subject with lawyers from other firms, who asked him, surprised, “whether the case was worth it”. At any rate, better safe than sorry, he thought it wise to file a claim four days later (common practice in class action; for fear of missing an opportunity for profit, law firms file in cases without even knowing for sure what they are about).

Thus, on December 12 that year, Lieberman filed a claim that was practically identical to Almeida’s, except that he represented another shareholder, Jonathan Messing, who held a mere 80 thousand dollars in Petrobras stock. “We had sent e-mails to several clients who might have shares in the company, and Mr. Messing answered,” he explained.

Once signed up, Lieberman began to study the case. He soon realized that it promised to be a big dog fight, and that if he wanted a chance to win, he would have to represent a hefty client. He travelled to England to meet with the board of Universities Superannuation Scheme, a 65 billion- dollar university fund, the largest in the United Kingdom, which managed the pension fund for 300 thousand people. “They had already been our clients in previous cases, but they had never led a class action claim before,” he told me. They signed the deal.

Months later, the pension fund and law firm were appointed to lead the class action. Lieberman says they now have more than forty people working on the case: “We’ve already spent millions of dollars.”


When a law firm is appointed to lead a class action, it is required to deliver a new, updated claim to the court, representing all the class action members’ interests. From that point on, the initial claim – in the Petrobras case, the one filed by André de Almeida – becomes a kind of rough draft for the rest of the litigation.

Lieberman’s document, five times longer than Almeida’s, was filed on March 25 last year. It opened by mentioning that in that month “approximately one million Brazilians” had taken to the country’s streets “calling for the impeachment of President Dilma Rousseff”. The protests, explained the document, had been triggered by “the enormous corruption scandal at the government-controlled oil giant, Petrobras, where Rousseff served as chairwoman from 2003 to 2010”. It also mentioned that the scheme had devalued the company’s capital by nearly tenfold: “in 2009 it was the world´s fifth largest company, with a market capitalization of 310 billion dollars”.

Lieberman went on to describe various cases of corruption uncovered by Operation Carwash. He cited the arrests of Workers’ Party (PT) treasurer João Vaccari Neto and Petrobras executives Paulo Roberto Costa, Renato Duque, Pedro Barusco, and Nestor Cerveró. He also mentioned the overpriced purchase of the Pasadena Refinery and the equally overpriced construction and engineering work at the Abreu e Lima Refinery and the Petrochemical Complex of Rio de Janeiro. The document spoke of a cartel formed by the Odebrecht, Camargo Corrêa, and Queiroz Galvão engineering and construction giants, which according to the deposition by Paulo Roberto Costa inflated the construction works by 20%, of which 3% was siphoned off to political allies.

In the allegations, with more than 200 pages, Lieberman also mentioned that “the Executive Directorate – including [former CEOs] José Sergio Gabrielli and Graça Foster – had repeated notice of the fraud”. To incriminate Gabrielli, the document cites the plea-bargaining deposition by money-changer Alberto Youssef, who claimed to have paid bribes “as a result of a direct order” from the former CEO of Petrobras. To accuse Graça Foster, it cited the e-mails sent in 2011 by the former Manager of the Supply Division, Venina Velosa da Fonseca, who stated she had warned Foster, when she was still Director of Gas and Energy, of irregularities in the state-run company’s communications division.

Knowledge of such facts, argued Lieberman, meant that a series of supposedly accurate statements and balance sheets published by Petrobras between 2010 and 2015 actually contained deliberately false information (the word “false” appears 95 times in the text). To expand the class action’s scope, Lieberman further decided to sue PricewaterhouseCoopers, responsible for auditing Petrobras’ books since 2012. He also filed charges against 18 Petrobras executives as defendants, including Gabrielli, Foster, Renato Duque, and Paulo Roberto Costa (an American attorney told me that Dilma Rousseff, who chaired the Petrobras board from 2003 to 2010, was kept off the list for fear that the lawsuit would extrapolate civil jurisdiction as a result, becoming a matter for the Department of State).

“The facts in this case are better than in any other class action I’ve worked on,” Lieberman told me with a triumphant air when I met him in New York. “The President is being impeached, the executives are going to prison, and the Federal Accounts Court has levied several fines. If Petrobras risks going to trial, the odds of its defeat are huge.”

I asked him how he would feel if the claim drove Petrobras to bankruptcy (unlikely, since 28 billion dollars represent about a fourth of Petrobras’ current debt of 130 billion dollars). “Of course I’ll feel bad if the company goes under,” he replied. “I want it to work. But who are the victims in this story?” He paused, trying to answer his own question: “It’s the shareholders, the Brazilians and the employees. We aim to show that if you want to invest in the United States, you have to follow the rules. Mauro Cunha, for example, understood that.”


Mauro Rodrigues da Cunha is CEO of the Brazilian Association of Capital Market Investors. He sat on the board of Petrobras from 2013 to 2015, representing minority shareholders.

“My role on the board gave me access to very important information,” Cunha stated in 2015 to the Congressional Committee that investigated Petrobras. He was referring to the clash in the Petrobras board in early 2014, when there was a meeting to approve the annual balance sheet. “The financial reports for 2013 failed to adequately represent the economic and financial reality of Petrobras,” he stated to the Congressional Committee, explaining why he had voted against the reports.

A month later, Guido Mantega, then chairman of Petrobras, suggested in a meeting, as recorded in the minutes, that there be a “turnover of participants in the committees”. Under the new format, Mauro Cunha was forced to step down from the audit committee and join the environmental committee. He stated to the Congressional Inquiry that “the [audit] committee then consisted of Sergio Quintella [vice-president of the Getulio Vargas Foundation], Luciano Coutinho [chairman of the National Economic and Social Development Bank, BNDES], and Miriam Belchior [then-Minister of Planning], in other words, all appointed by the controller, and the majority of whom were the controller’s employees.” He claimed that the appointments undermined “the committee’s impartiality at the precise moment when such impartiality proved most important for Petrobras”. He concluded: “The committee was gerrymandered.”

The class action claim against Petrobras mentions Mauro Cunha on page 62. It recalls that in April 2015, not only Mauro Cunha but also board members José Monforte and Silvio Sinedino challenged the previous year’s balance sheet – which however did not prevent the report from being approved and announced to shareholders. In the report, the company entered 6.2 billion reais in losses referring to “overpayment incorrectly capitalized”, a euphemism for the kickback scheme uncovered by Operation Carwash. The calculation, backed by Paulo Roberto Costa’s collaborative deposition, was based on 3% of the contracts’ value. Cunha stated in his vote that he saw no sense “in entering these amounts based on the plea-bargain depositions of disreputable individuals”. He also complained that the 319-page financial report was distributed to board members on the day of the vote and was approved “on the basis of PowerPoint presentations, with no possibility of board members reading the balances”.

When I met with Mauro Cunha last May at the association’s headquarters in São Paulo, he refused to talk about Petrobras, recalling that he had lost both his “health and hair” while he sat on the board. “My beard wasn’t gray before either.” He did say, however, that the lack of control in the Brazilian securities market – plus the lack of legal recourse to protect investors, like class action, could trigger a mass shareholding exodus from the country. “We’re actually managing to export our securities market, due to our legal system’s weakness. If we don’t protect investors, they’ll start purchasing Brazilian assets abroad.”

Today, besides Petrobras, five other Brazilian companies – Braskem, Vale, Bradesco, Gerdau, and Eletrobras – are facing class action litigation in the United States. None of them is a defendant in similar court action inside Brazil.


Petrobras has taken internal measures to reclaim its market image. In November 2014 it created the Division of Governance, Risk, and Compliance, under executive João Elek Junior, in charge of avoiding new irregularities. A month later the state-run company also set up a special committee, with the assistance of three outside law and audit firms, to investigate suspicions of fraud. Headed by Ellen Gracie, former Justice of the Brazilian Supreme Court, the committee has already spent 370 million reais.

Meanwhile, in the U.S. District Court, Petrobras is defended by the New York firm Cleary Gottlieb Steen & Hamilton, which has branch offices in more than ten countries and is often cited as one of the most powerful law firms in the United States. Cleary headquarters in New York occupies eleven floors of a building with a full view of One World Trade Center, in the heart of the city’s financial district. The entrance features a special line for the firm’s clients.

Roger Cooper is the lead attorney for the Petrobras defense. On Thursday, June 25, 2015, he and Jeremy Lieberman faced off before Judge Jed Rakoff in the U.S. District Court of the Southern District of New York. Each had twenty minutes for his oral arguments. Cooper was accompanied by another lawyer and two Petrobras executives. He began with the defense of former Petrobras CEO Graça Foster.

The accusation relies on “allegations involving someone named Ms. Fonseca and complaints that she raised with the company about irregularities and certain issues with kinds of payments, but the complaints that she raised were with respect to the communications department at Petrobras,” Cooper explained, emphasizing that the department had nothing to do with the contractors’ cartel. “In fact, the only number that is pleaded with respect to these irregularities in the complaint is simply $18.8 million. It comes nowhere close to the kinds of numbers that the plaintiffs are alleging were being used for bribes as part of the payment scheme.” Cooper also said that based on the suspicion raised by Fonseca, then-CEO of Petrobras José Sergio Gabrielli set up a committee to look into the alleged irregularities.

Next, Cooper claimed in the defense that participation of certain individuals in the scheme, like Paulo Roberto Costa, could not be generalized to the point of punishing the entire company. “there is nothing alleged that they were involved in any way in making the statements that are challenged here in the company’s public disclosures.,” he explained. “They acted in their own interest and contrary to the company’s interests.” He emphasized that Petrobras did not obtain any benefit from the cartel. “It is undisputed that the effect on the company’s balance sheet the company look worse, not better, because as a result of the scheme, it appeared that the company paid more for assets than it would have had the scheme never happened. Had the scheme never occurred, it would have paid three percent less for those assets.”

Lieberman was then allowed to reply. He said that Venina da Fonseca and Graça Foster had engaged in several conversations concerning the kickback scheme between 2008 and 2014. “The investigation regarding the Abreu e Lima facility was launched by Gabrielli himself based upon Fonseca’s claims,” he said, referring to Fonseca. He recalled that although the committee assembled by Gabrielli identified an increase from 4 to 8 billion dollars in the cost of the refinery works, the board of directors continued to endorse such works. “Again, your Honor, this is fraud being brought to the highest levels of the company. (…)  It’s not a matter of some rotten bad apples, this is the entire root of the company being corroded by fraud.”

He then replied to the argument that Petrobras had not benefited from the scheme. “Your Honor, the company is 51 percent owned by the government. It is certainly helping the government,” he explained. “The interest between the corrupt politicians who ran the government at the time and the corrupt people running the company are unified here, your Honor. […] They had nothing to gain, as it were, by coming clean.” He also challenged the calculation by Petrobras that the losses from the kickback scheme were 6.2 billion reais.

In his re-rebuttal, Roger Cooper claimed that the lack of fiscal control in the Abreu e Lima Refinery had resulted from mismanagement, “which does not rise to the level of securities fraud”. He used the same argument, quoting a report by the Brazilian Federal Accounts Court, to describe the overpriced 792-million-dollar purchase of the Pasadena Refinery. “Maybe they paid too much, but there is no allegations about bribery,” Lieberman counter-argued, citing the recommendation by the Federal Accounts Court to freeze Gabrielli’s assets: “You freeze a person’s assets because you have something illegitimate.” The hearing, convened for the judge to hand down preliminary rulings on the case, was adjourned after an hour and a half. In December 2015, six months after the attorneys’ standoff, Nestor Cerveró confessed in a plea-bargain deposition that the Pasadena purchase had yielded 15 million dollars in kickbacks.

On the following Sunday morning, the last day of May, Roger Cooper received me for half an hour at Cleary Gottlieb headquarters in New York. He was accompanied by Lewis Liman and Francesca Odell, two other lawyers working on the case. At the meeting, confirmed a day in advance, Cooper stuck to the position that Petrobras is a victim (and not the hangman) in the story. He said that no Petrobras financial report has been challenged in Brazil by the Comissão de Valores Mobiliários (the Brazilian sec), or by the sec itself in the United States. He complained that some of the funds in the class action continued to invest in Petrobras even after the claim was filed. And he stated that the company does not intend to settle out of court.


Since the class action claim was filed in December 2014, Judge Jed Rakoff has handed down several rulings. He has based these on the date the Petrobras balance sheets were published in order to determine the exact period covered by the case, which then included all shareholders that traded in Petrobras’ American securities from January 22, 2010, to July 28, 2015. He also ruled that the case would be divided into two groups: one hurt by the securities devaluation – 80% during the period in question – and the other, much smaller, hurt by the purchase of public debt bonds. In August 2015, Rakoff denied Lieberman’s request for the case to include investors that had been defrauded by purchasing Petrobras securities on the São Paulo Exchange (Bovespa). In February this year, he ruled that PricewaterhouseCoopers had not acted in bad faith when it approved the company’s annual balance sheets. The accounting firm is still a defendant, but only due to the opinions issued on the sale of debt bonds.

At the plaintiff’s request, Rakoff issued several letters rogatory (a legal instrument for cooperation between two jurisdictions) requesting that the Brazilian courts take depositions from money changer Alberto Youssef, lobbyist Fernando Baiano, former Senator Delcídio do Amaral, and former Petrobras executives Paulo Roberto Costa, Renato Duque, Jorge Zelada, Pedro Barusco, and Nestor Cerveró. The letters also requested that certain documents be collected from the engineering and construction companies Andrade Gutierrez, Odebrecht, Galvão Engenharia, and Camargo Corrêa.

Petrobras used the same legal mechanism, asking Rakoff to send letters rogatory to England (where hsbc headquarters is located) and Switzerland (where Credit Suisse is located). The idea, looking more like an attempt at harm reduction, is to shrink the shareholders’ group by excluding investors that had adss in those two countries (U.S. law allows NYSE securities to be traded by banks and funds elsewhere, but it does not protect investors who purchase such securities outside the United States).

Mauro Cunha was not cited in any letter rogatory. Of the various executives mentioned in the lawsuit, he was the only one to be directly subpoenaed to testify in the United States. The request came from Lieberman, on grounds that Cunha held “critical information” on Petrobras. Gabrielli, Foster, and some former board members tried to prevent his deposition, claiming in a letter to the judge that to subpoena a foreigner would violate the U.S. Constitution: “The court should hesitate before ordering such an act.” Since Cunha was born in the United States, the request was overruled.

In March, Graça Foster and José Sergio Gabrielli also addressed letters to the District Court denying every paragraph of the accusation (similar documents were sent by former executives like Guilherme Estrella, who headed the Petrobras Division of Exploration, and Almir Barbassa, Financial Director). In the 88-page reply by Foster, the phrase “Foster denies the allegations” appears 592 times. In Gabrielli’s, the phrase appears 579 times.

Beside the class action, Petrobras faces 29 individual lawsuits in the United States, filed by plaintiffs that chose not to join the group claim, hoping to negotiate their own settlements and thus ensure a higher financial return. Plaintiffs range from pension funds like the New York City Employees Retirement System to foundations like the Bill and Melinda Gates Foundation, plus all sorts of banks. (The individual claims, also tried by Judge Jed Rakoff, revolve around the class action, like little fish swimming around a shark to eat the scraps; they will be interpreted in light of the class action outcome.)

Finally, there are two draft claims that are still waiting on the back burner. In Europa, ISAF (International Securities Associations and Foundations), convening investors from Spain and the Netherlands, plans to sue Petrobras in the Rotterdam courts. In Brazil, the Association of Minority Investors has announced that it will file class action in Rio de Janeiro (in May this year, a similar claim by the same association, against Eike Batista, was denied by a district court). “It would be absurd to compensate the American shareholders, but not the Brazilians,” contends economist Aurélio Valporto, the association’s vice-president. “Brazilian shareholders have already been defrauded by the thievery that drove the company to its current state of penury, and they will be hurt a second time when the company is devalued because of compensations in the United States.” Valporto says he is awaiting a solution to bureaucratic obstacles in the association’s bylaws before filing the claim. In a sense, he is also waiting for Judge Rakoff’s rulings: “We haven’t surveyed the losses. We plan to use the class action results as the parameter.”


On a cold Friday in mid-April, I met Jeremy Lieberman for second time in his Manhattan office. He was wearing a black zip-up sweater and had a yarmulke on, signaling the arrival of shabat. I asked him why he didn’t grow a long beard, as tends to be common in the Orthodox Jewish community. “My wife wouldn’t let me,” he replied, laughing.

The first letters rogatory had been sent to Brazil that month. “They should reach the addressees at some stage, but maybe not before the class action ruling is handed down,” he commented, alluding to the bureaucratic tangles. He also said that in case of a settlement, he imagines something on the order of tens of billions of dollars. “Various scenarios are being considered.”

I told him I had heard from attorney Roger Cooper that Petrobras planned to go all the way to court with the case. “Isn’t there any talk between the two of you about a possible settlement?” I asked. Lieberman answered by opening his hands, palms up, with a terse smile, mouth closed. “Even the current balance sheets are false,” he said. “Even when they try to come clean, it’s not enough.”

Petrobras declined to receive piauí for this story. The company sent a note via the press advisor that described the claims as “unfounded”, reiterating that it was “preparing for the trial scheduled for the second half of 2016”. (Even so, the new CEO, Pedro Parente, stated to the Wall Street Journal in June that the history of class action in the United States “shows that you make settlements”.)

There are two main issues to be tried in the case. The first is whether the company can be held liable for a crime committed by a group of individuals – who, it should be noted, occupied official positions in the company hierarchy. The second is to determine the exact amount of the award. “It is difficult to separate which part of the fall in share value was due to corruption, and which part was due to the drop in oil prices,” emphasized American attorney Robert Finkel from the Wolf Popper office, when I met him in New York.

If the accusation prevails, the award will be set by Judge Jed Rakoff. “He owes nothing to anybody; he’s a kind of American Sérgio Moro,” Lieberman said confidently. If the ruling confirms the corruption charges, Petrobras will have to cover the entire damages. If it is convicted of mismanagement, it may share the burden with its underwriters. If the company wins, it will not be compensated for the litigation costs.

The trial is scheduled for Monday, September 19, in New York City.

* Translator’s note: The article’s title is a paraphrase on “The Oil is Ours!” (O Petróleo é Nosso!), the nationalist slogan used in the 1950s during the campaign leading to the creation of the state-owned company Petrobras.