The bribery of foreign officials is a violation of the US Foreign Corrupt Practices Act (FCPA), but the complaint for this securities class action says that not telling your shareholders about the bribery is a violation of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934.
The class for this action is all persons and entities who acquired Graña y Montero American Depository Shares (ADSs) between April 30, 2014 and February 24, 2017.
Graña y Montero SAA, a Peruvian company, offers engineering, construction, infrastructure, real estate, and technical services in Latin America.
Between 2005 and 2011, the complaint claims, a Graña y Montero subsidiary was part of a group that built two highways between Peru and Brazil. The group was led by a global Brazilian construction company called Odebrecht SA.
During the class period, however, the company’s public filings did not disclose this information, the complaint says. The class period begins with the filing of its Form F-20 for fiscal year 2013 on April 30, 2014.
That Form-20, as well as its Form 20-Fs for fiscal years 2014 and 2015, contained statements praising its work and claiming its personnel shared “our core corporate values of quality, professionalism, reliability and efficiency.” They each also said that, as a company listed on the Lima Stock Exchange and (after 2013) the New York Stock Exchange, “we also abide by the highest corporate governance standards in Peru.”
The complaint claims that these statements were not true, because the company had known that Odebrecht had bribed former Peruvian president Alejandro Toledo in order to win the construction project.
In December 2016, the US Department of Justice (DOJ) announced that Odebrecht had pleaded guilty to bribery and had agreed to pay a large penalty to resolve charges with US, Brazilian, and Swiss authorities.
At the same time, the Criminal Division’s Fraud Section of the DOJ and the US Attorney’s Office in the US District Court for the Eastern District of New York on the same day charged Odebrecht with conspiracy to violate the anti-bribery provision of the FCPA.
On February 24, 2017, the end of the class period, Reuters published an article claiming that Graña y Montera knew about the bribes paid by Odebrecht. It quotes the former head of Odebrecht as saying, “The rest of the companies did know, not the details, but they did know there was an agreement. They knew we made the payments and knew they would have to assume their part.”
At the revelation, the company’s ADSs fell by over 34%.