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April 27, 2015

Scandal-hit Petrobras publishes audited multi-billion losses

By Isabella Grotto

Brazilian state-controlled oil company Petrobras has accepted a $17bn impairment charge in the latest development of a bribery scandal that has sparked investigations into a number of senior government officials as well as the company’s external auditors, PwC.

The oil giant published its long-awaited, audited financial results for 2014 last week, announcing an overall loss of $7.2bn.

The loss follows a $16.8bn write-off taken by the company to reflect the fall in its assets following allegations that the allocation of high-value contracts was influenced by bribes to government officials.

The results announcement comes less than a month after a group of investors in Petrobras expanded their lawsuit against the company to include the Big Four auditor.

External auditors to the company since 2012, PwC have been accused of "turning a blind eye" and "ignoring obvious red flags" in a complaint filed in Manhattan federal court at the end of March.

In November last year, the Big Four firm refused to approve Petrobras’s third-quarter earnings, reportedly demanding further investigation into the already unfolding corruption scandal and threatening to report the case to US authorities.

Since then, PwC has been involved in the valuation of the impact of the corruption; the set of accounts published last week is based on estimates formulated on the basis of witness testimony to Brazilian police stating that 3% of all major contracts between 2004 and 2012 was distributed in bribes.

The corruption scheme came to light a year ago, through testimony delivered as part of plea bargains by two suspects, including a former Petrobras executive, arrested during the course of a money laundering investigation in March 2014.

Over 40 senior politicians, including the presidents of both of Brazil’s houses of Congress, are currently being investigated and the scandal has sparked protests across the country.

President Dilma Rousseff herself held the post of chair of Petrobras’s board between 2003 and 2010, but has been cleared of involvement by an attorney general investigation.

Contacted by IAB, a spokesperson for PwC Brazil said the firm has not been notified of any lawsuit.

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Brazil survey: Profession upbeat despite the downturn

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