Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) Corruption Scam Engulfs Brazil’s Biggest Banks

The worst period of Brazil’s Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) is not over yet. The spell of doom of the multi-billion dollars of corruption scam has in fact started taking into its claws the biggest banks of the country.

Does this analyst foresee a long-term upside in PBR?

The biggest banks of Brazil enter the black hole of country’s biggest corruption scandal

 Ever since the federal prosecutors began a probe into the scandal last year in March, there have been more and more executives, politicians (including the Brazilian President) and companies entering this black hole of corruption. In the latest report of Forbes, it has been revealed that around 15 banks of Brazil are currently facing the legal actions for enabling the company’s bonds in the debt market of the U.S. Already; the company’s scandal has been hitting the country hard.

A court in New York, in its hearing on April 3, 2015, will try to find out how some of the top Brazilian banks’ investment banking divisions committed no illegal action while selling the company bonds to the U.S. investors. Some of the renowned banks such as Itau Unibanco Holding SA (ADR) (NYSE:ITUB) and Banco Bradesco SA (ADR) (NYSE:BBD) have been involved in the case.

Brazilian Banks Wrongly Baiting U.S. Investors

In the case filed by the plaintiffs, there are accusations that Petroleo Brasileiro Petrobras SA (ADR) (NYSE:PBR) and the bond underwriters have wrongly baited the U.S. investors by overstating the assets’ value. This has been done so as to over-estimate the ability of company to service the loan.

The legal supporters of these banks shall argue in favour of them, on the grounds of ignorance. These legal teams will debate that their clients (the Brazilian banks) did not have any knowledge regarding these over inflated assets and that the information was known to them only after the investigation came to light.

At present, Petrobras is the only oil company in the world that is most indebted.

About the Author

Erica is a graduate of New York University’s school of Journalism. She joined US Markets Daily as a general assignment reporter in January of 2008.

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