[JURIST] The City of Providence, Rhode Island filed a class action suit [complaint, PDF] against Brazil’s state-run oil company Petrobras [official website] on Wednesday in the US District Court for the Southern District of New York [official website]. The complaint alleges Petrobras engaged in a fraudulent scheme to inflate the value of the company’s net income by falsely reporting bribe-related expenses on federal documents during the period of January 2010 to November 2014. Additionally, the plaintiffs allege Petrobras raised over USD $98 billion through the sale of securities and American depository shares on the NYSE to finance new facilities and new petroleum production assets based on false and misleading accounting records. The false records inflated the price of Petrobras securities and the debt securities of two wholly-owned subsidies. The City of Providence invested in Petrobras securities and the suit was filed pursuant to federal securities laws [SEC backgrounder] governed by the US Securities and Exchange Commission (SEC) [official website], including the Securities Exchange Act of 1934 and the Securities Act of 1933. As of Friday, a total of 39 people were indicted in Brazil [BBC report] including a number of Petrobras senior executives on charges of corruption, money laundering, and racketeering. If convicted, the executives could face up to 20 years in prison.

Brazil continues to struggle with allegations of corruption, in spite of its attempts to combat risks against corruption in politics and business, including the enactment of a new anti-corruption law [Association of Corporate Counsel report] in August of 2013. The law [text, in Portuguese] took effect on January 28, 2014. The suit filed on Thursday by the City of Providence is the third suit filed [Forbes report] against Petrobras in less than a month. In mid-November 2014 Petrobras auditor PricewaterhouseCoopers refused to certify the company’s financial statements [Providence Journal report]. The auditing failure resulted in a subpoena from the SEC. Petrobras executives could face legal penalties in both the US and Brazil. Further, some of Brazil’s most powerful politicians are named in the suit against the state-owned company, including Brazilian President Dilma Rousseff [BBC backgrounder].