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CORRECTED-U.S. firm files class action against Brazil steelmaker Gerdau
May 26, 2016 / 7:26 PM / 2 years ago

CORRECTED-U.S. firm files class action against Brazil steelmaker Gerdau

(Corrects name of law firm to Pomerantz LLP from Rosen throughout)

SAO PAULO, May 26 (Reuters) - New York investor rights law firm Pomerantz LLP filed a class action suit against Brazil’s Gerdau SA, Latin America’s largest steelmaker, alleging the company issued materially misleading business information filed to investors over tax liabilities.

Porto Alegre, Brazil-based Gerdau is the latest Brazilian company with shares traded in the United States to face actual or potential lawsuits over securities fraud as a result of Brazilian corruption investigations.

The Pomerantz lawsuit alleges Gerdau failed to disclose it and its executives bribed tax authorities, defrauded Brazil’s tax revenue service of $429 million, laundered illegal funds and carried out influence peddling, according to the filing.

Federal police in Brazil raided Gerdau offices in March 2015 and February 2016 as part of Operation Zelot, a probe into tax fraud through which companies are alleged to have bribed tax revenue agents to issue favorable rulings.

Earlier in May, Brazilian police filed charges alleging Gerdau evaded $429 million in taxes and against Chief Executive Officer André Gerdau Johannpeter for corruption.

Pomerantz is seeking investors in Gerdau ADRs from June 2, 2011 and May 15, 2016 to participate in its suit. For it to proceed as a class action, a court must accept it as meeting a minimum criteria.

Earlier in May, another New York firm, Bronstein, Gewirtz & Grossman LLC, launched an investigation into whether investors in the company’s ADRs suffered losses due to similar allegations related to Gerdau’s ongoing tax corruption case in Brazil.

The growing docket of securities fraud lawsuits follow probes that uncovered a giant price-fixing, bribery and political kick-back scandal at state-led oil company Petroleo Brasileiro SA in early 2014.

Brazil’s main stock exchange was closed on Thursday for a national holiday, but the company’s ADRs were trading up 4.7 percent in the early afternoon. (Reporting by Reese Ewing and Jeb Blount; Editing by Andrew Hay)

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