New York-based law firm Bronstein, Gewirtz & Grossman, LLC announced Thursday that a class action lawsuit has been filed against of Gerdau S.A. and certain of its officers. The class action, filed in United States District Court, Southern District of New York, is on behalf of a class consisting of all persons or entities who purchased or otherwise acquired Gerdau securities as American depositary receipts between June 2, 2011 and May 15, 2016.
The complaint alleges that throughout the Class Period, Defendants made materially false and misleading statements regarding the company's business, operational and compliance policies. Specifically, Defendants made false and/or misleading statements and/or failed to disclose that:
• The Company was engaged in a bribery scheme in collusion with Brazil's Board of Tax Appeals (CARF).
• Gerdau had defrauded Brazilian tax authorities of roughly $429 million in taxes.
• Gerdau's Chief Executive Officer, Defendant André Bier Gerdau Johannpeter and other directors and employees of the Company had engaged in bribery, money laundering, and influence peddling.
• As a result of the foregoing, Defendants' statements about Gerdau's business, operations, and prospects were false and misleading and/or lacked a reasonable basis.
• The Company was engaged in a bribery scheme in collusion with Brazil's Board of Tax Appeals (CARF).
• Gerdau had defrauded Brazilian tax authorities of roughly $429 million in taxes.
• Gerdau's Chief Executive Officer, Defendant André Bier Gerdau Johannpeter and other directors and employees of the Company had engaged in bribery, money laundering, and influence peddling.
• As a result of the foregoing, Defendants' statements about Gerdau's business, operations, and prospects were false and misleading and/or lacked a reasonable basis.
On or about March 26, 2015, Brazilian authorities announced that a Federal Police investigation, dubbed Operation Zelotes, had uncovered a multibillion-dollar tax fraud scheme at the Ministry of Finance, reporting that as many as 70 companies had bribed members of the CARF, a body within the Finance Ministry that hears appeals on tax disputes, to obtain favorable rulings that recused or waived the amounts that the companies owed. On or around March 29, 2015, it was reported that Gerdau was among the companies under investigation.
On February 29, 2016, Gerdau announced that it would delay the release of its fourth-quarter financial results as the Company "analyze[d] the case records involving Gerdau in the recent phase of [the] Zelotes Operation."
On May 16, 2016, various news outlets reported that Brazil's federal police had accused Gerdau of evading $429 million in taxes and indicted a total of 19 Gerdau personnel, including Defendant Johannpeter and some of the Company's executives, directors and lawyers, on corruption-related charges including bribery, money laundering, and influence peddling.