COURT RULES IN FAVOR OF EIG IN "LAVA JATO" CORRUPTION SCHEME
Court Rules in Favor of EIG in “Lava Jato” Corruption Scheme
Claims Against Petrobras to Proceed in D.C. Federal Court
Washington, D.C., April 3, 2017 - EIG Global Energy Partners (“EIG”) today announced that the United States District Court for the District of Columbia (the “Court”) ruled in its favor in an action brought by its EIG Energy Funds XIV and XV (the “Funds”), against Petróleo Brasileiro S.A. (“Petrobras”), the Brazilian state-owned oil company, stemming from the so-called “Lava Jato” or “Operation Car Wash” bribery, kick-back and corruption scandal. The Court’s ruling means that the Funds’ claims that Petrobras defrauded the Funds and wrongfully caused the Funds and their investors to lose over US$221 million in investments will now be heard in the U.S. Federal Courts, not in Brazil. As a result of this favorable ruling, the Funds can now proceed with their claims against Petrobras for damages, which includes seeking the full recovery of the Funds’ initial investment, punitive damages, and other relief.
Commencing in 2011, the Funds invested over $221 million in an off balance sheet company formed by Petrobras, called Sete Brasil Participações (“Sete”) to develop a fleet of 28 oil drilling ships at a total cost of over $20 billion. Sete would lease back the drill ships to Petrobras, which would use them to drill for oil in the Pre-Salt Reserves off the coast of Brazil. When Brazilian prosecutors in the course of the “Car Wash” investigation discovered that Petrobras and Sete executives had procured millions of dollars of bribes from the drill ship builders for the benefit of Petrobras and Sete executives and the Workers Party of Brazil, bank financing critical for Sete’s ship-building program and other operations was promptly cut off, resulting in the bankruptcy of Sete and the total loss of the Fund’s investment.
In commenting on the Court’s ruling, EIG’s Chief Executive Officer, R. Blair Thomas, said “We are gratified that the Court has validated our long-standing view that the US judicial system is the proper venue to adjudicate injuries suffered by our investors, particularly given the egregious facts of this case. We believe the Court was correct in recognizing that the ‘United States has a strong interest in providing a forum for its citizens’ grievances against an allegedly predatory foreign business that actively solicited business and caused harm within the home forum.’ We are hopeful that with Petrobras now in the hands of new, professional management, it will take this opportunity to fully and properly reimburse investors such as the Funds for their losses, and refocus its efforts on the successful development of the Pre-Salt Reserves. EIG has been investing in Brazil since 1999 and we have been one of the largest financial investors in the Brazilian energy sector in recent years. EIG remains committed to Brazil and continuing to contribute to Brazil’s long-term success.”
The Funds are represented in the case by Daniel Goldman and Kerri Ann Law of Kramer, Levin, Naftalis & Frankel, LLP of New York, New York.
EIG Global Energy Partners specializes in private investments in energy and energy-related infrastructure on a global basis and has $14.4 billion under management as of December 31, 2016. Since 1982, EIG has been one of the leading providers of institutional capital to the global energy industry, providing financing solutions across the balance sheet for companies and projects in the oil and gas, midstream, infrastructure, power and renewables sectors globally. EIG has invested more than $23 billion in more than 310 portfolio investments in 36 countries. EIG is headquartered in Washington, D.C., with offices in Houston, London, Sydney, Rio de Janeiro, Hong Kong and Seoul. For more information, please visit www.eigpartners.com.
Sard Verbinnen & Co.
Robert Rendine / Brandon Messina