Petroleo Brasileiro Petrobas SA (PBR) is confronting further investigation from the Comissão de Valores Mobiliários (CVM), the securities regulator in Brazil on allegations of failed fiduciary duties by its executives due to a corruption scandal that caused huge losses to investors.

Allegations against Petrobas SA

The prosecutors in Brazil alleged that the executives of Petrobas SA conspired with construction companies and government officials in a contract kick-back scheme for years.

According to the prosecutors, engineering firms paid bribes to obtain contracts from Petrobas. Corrupt executives, vendors and political parties received a portion of the bribes.

Brazil’s regulator first discovered signs of corruption within Petrobas SA in 2009.  At the time, Brazil President Dilma Rousseff stated that the state-run oil company “has the most accurate accounting standards in the world.” Rousseff was then serving as chairperson of the board of Petrobas SA.

CVM started its investigation last March. The Brazilian securities regulator recently announced its decision to expand its investigation against Petrobas SA.

Petrobras

Brazil’s president promised to investigate Petrobas SA

There is a possibility that the regulator will also investigate Rousseff since the corruption happened while she was serving as chairperson of the board of Petrobas SA.

Rouseff was elected as president of Brazil for a second term and she promised to investigate the corruption scandal involving Petrobas SA. Rousseff emphasized that she has no knowledge about the issue.

According to Reuters, Rousseff missed opportunities to prevent the corruption that was happening within Petrobas SA based on its review of a 2009 federal investigation of the company.

The media entity suggested that the crisis confronting the state-run oil company has become so big that it could pull the slow-growing economy of Brazil back into recession next year.

More than two dozen people including two former executives, who were allegedly involved in the corruption case against Petrobas SA have been indicted.

The shares of the state-run oil company were trading $6.80 per share, down by nearly 7% at the time of this writing, around 1:14 in the afternoon in New York.  Petrobas SA lost more than 50% of its value over the past six months.