Cemex claimed in its public statements that it had anti-bribery and corruption policies, but now that it has discovered that certain of its executives may have paid bribes, the complaint for this securities class action claims that those statements were violations of the Securities Exchange Act of 1934.
The class for this action is all persons who acquired securities of Cemex between August 14, 2014 and March 13, 2018.
Cemex, founded in 1906, is a building material company that makes cement, ready-mix concrete products, aggregates, and related building materials. It operates in the Americas, Europe, Africa, the Middle East, and Asia. Its American Depository Receipts (ADRs) trade on the New York Stock Exchange.
At the beginning of the class period, on August 14, 2014, Cemex put our a press release announcing that its subsidiary Cemex Latam was building a cement plant in Colombia. According to the press release, the plant was located in an area with high levels of economic growth and was “expected to further benefit from the construction of infrastructure projects” in the area.
On April 27, 2015, the company filed its Form 20-F annual report for 2014, announcing its results for that year. Included in the report was a section on ethics, which said, in part, “Anti-bribery: we reject all forms of corruption; paying or receiving bribes is illegal and unethical and can lead to severe consequences for all parties involved, including jail for individuals and harsh penalties to our company…” Other statements talked of “transparency and integrity” in the conduct of its business.
The company repeated these statements in its Form 20-F annual report, and similar statements are contained in the company’s Code of Ethics.
Despite these firm statements, on September 23, 2016, Cemex issued a press release that announced that two of its senior executives had been dismissed after an internal investigation showed that they had made $20 million worth of illicit payments in a land deal in Colombia. The press release said it had informed the Columbian attorney general and promised to cooperate in any additional investigation. This news led to a fall in Cemex’s ADR price of roughly 2.28%.
But more bad news followed. On December 9, 2016, the company announced it had received a subpoena from the Securities and Exchange Commission (SEC) about the Colombia payments, “seeking information to determine whether there have been any violations of the US Foreign Corrupt Practices Act…”
Roughly three months later, on March 14, 2018, the company disclosed that the US Department of Justice was also investigating the company over the payments, to see if it had violated any federal bribery laws. The stock price fell by another 1.64% at this disclosure.