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Harry Cassin
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Andy Spalding
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Julie DiMauro
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Thomas Fox
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Marc Alain Bohn
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Bill Waite
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Russell A. Stamets
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Eric Carlson
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Braskem SEC filing reveals fallout from Brazil’s Operation Car Wash

In an SEC filing Friday, Brazil petrochemical giant Braskem SA said it is investigating allegations that two former executives paid bribes to state-owned Petrobras for favorable raw material supply agreements, and it has self reported the findings to regulators in Brazil and to the DOJ and SEC in the United States.

The company said it hasn’t heard back from the U.S. agencies.

The announcement is apparently the first fallout from Operation Car Wash to be disclosed in an SEC filing.

A probe into Petrobras, which produces most of Brazil’s oil and gas, was launched by Brazil prosecutors last year. The investigation — known as Operation Car Wash — has implicated scores of big companies and dozens of executives and politicians.

Braskem said it and two former executives are accused of making improper payments for Petrobras raw material supply contracts from 2006 to 2012. The allegations were made in lawsuits filed by third parties and appeared in public, the company said.

Last week, Petrobras put a $2 billion price tag on its own corruption-related expenses.

In November, a Brazil judge froze $16.8 billion in assets belonging to suspected participants in the Petrobras graft schemes.

São Paulo-based Braskem is Latin America’s biggest petrochemical producer. Annual revenue last year was about $23 billion. It has 8,000 employees worldwide at 36 production facilities, including five in the United States.

Braskem SA trades on the New York Stock Exchange under the symbol BAK.

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Here’s Braskem’s full FCPA disclosure on its Form 20-F filed with the SEC on April 24, 2015:

In early March 2015, declarations made by defendants in lawsuits filed against third parties were made public, in which Braskem and two of its former executive officers were cited in allegations of supposed improper payments between 2006 and 2012 to benefit the Company in raw-material supply agreements entered into with Petrobras. As of April 24, 2015, to the knowledge of the management, Braskem has not received any notification of the filing of any proceeding or investigation by Brazilian or U.S. authorities.
In light of such facts, the Company’s Management and Board of Directors approved in April the internal plan for investigation into the allegations (“Investigation”) to be carried out by law firms experienced in similar cases in the United States and in Brazil. The law firms will work under the coordination of an ad hoc committee formed by members of its Board of Directors, specially created for this purpose.
In addition, the following measures have already been taken:

i) Voluntary announcement about the Investigation and periodical updates sent to regulatory agencies of capital markets in Brazil (Securities and Exchange Commission of Brazil – CVM) and the United States (Securities and Exchange Commission – SEC, and the Department of Justice – DOJ);

ii) Publication of two Material Fact notices and one Notice to the Market to clarify the news reports and to keep shareholders and the market informed of actions taken by the Company;

iii) Updating the Audit Board and external auditors about the progress of the Investigation and of the actions already taken.

Braskem and its subsidiaries are subject to a series of anti-corruption and anti-bribery laws in the countries where they operate. To reduce the likelihood of infringement of such laws, a series of procedures and controls were implemented and are continuously being improved.

On the other hand, if any of the allegations proves to be true, the Company may be subject to material penalties envisaged in law. At this moment, the Company Management believes that it is not possible to estimate the duration or outcome of the Investigation and, consequently, whether it will have any impact on future financial statements.

The Management is committed to taking all the necessary measures to clarify the facts and will keep the market informed of any progress on this matter.


Richard L. Cassin is the publisher and editor of the FCPA Blog. He can be contacted here.

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