At a time when most companies are busy filing their third quarter returns and bearing the outcome on their share prices, Brazilian oil-company Petrobras SA (ADR) (NYSE:PBR) is unable to do so owing to its auditing firm PriceWaterhouse Coopers. While PwC refused to comment on the issue on grounds of upholding client’s confidentiality, the state owned entity let it be known that the root cause was the its involvement in a corruption scandal.
Allegations of corruption in form of kickbacks pertaining to contracts for the projects surfaced when two former employees of Petrobras SA (ADR)(NYSE:PBR) decided to blow the whistle on the firm illicit dealings. Paulo Roberto Costa, the former supply director of the firm, and Alberto Youssef, a businessman, began to narrate details after having been arrested in lieu of their sentences being shortened. Both individuals also admitted to being a part of the conspiracy at different levels with Youssef’s foreign exchange firm being responsible for handling the skimmed amount.
Being a Brazilian company, although Petrobras SA (ADR)(NYSE:PBR) has time till 14th November, 2014, to file its financial statements, it is unlikely to do so with its auditor not only refusing to sign on the Q3 earnings report but also threatening to take the firm to US courts of law. In response the company has hired two private investigators who function independently to look into the matter. The official statement released by the company read as follows –
“Petrobras has signed contracts with two independent firms, one from Brazil and the other from the United States, specialized in investigation to look into the nature, extent and impact of the alleged misdeeds.”
With as many as 30 politicians from the current regime featuring in the list, Petrobras SA (ADR)(NYSE:PBR) has little choice but to wait for the air to clear up in order to hike price of gas in Brazil. The Government’s intention of re-introducing Cide, meaning gasoline tax, has also been temporarily shelved in light of the situation.
This article has been written by Vinita Basu.
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