Investors in Petroleo Brasileiro SA, the state-run oil company at the center of a kickback scandal in Brazil, expanded their lawsuit against the company by adding claims that auditor PricewaterhouseCoopers LLP turned a “blind eye” to the fraud and “ignored obvious red flags.”

Petrobras and its senior executives violated provisions of U.S. and Brazilian corporate law, as well as the South American nation’s securities laws, civil code and Securities Commission regulations, according to the revised complaint filed Friday in Manhattan federal court.

The amended lawsuit revolves around claims that Petrobras executives engaged in a multiyear, multibillion-dollar money-laundering and bribery scheme that was concealed from investors. It notes that Brazilian President Dilma Rousseff, who is struggling to contain damage from the scandal, was chairwoman of Petrobras from 2003 to 2010.

The court filing also includes testimony released by a Brazilian federal court that the executive in charge of Petrobras’ refining division confessed that the company accepted kickbacks for giving inflated construction contracts and “then used the money to bribe politicians through intermediaries to guarantee they would vote in line with the ruling party while enriching themselves.”

U.S. District Judge Jed Rakoff in Manhattan on March 4 appointed New York law firm Pomerantz LLP and its client, a Liverpool, England-based pension fund, to lead a class of investors who claim they lost money when the scheme became public and shares plunged. Rakoff is presiding over a group of combined securities fraud suits filed by investors who bought Petrobras’s American Depositary Receipts.

Marcia Avruch, a spokeswoman for PricewaterhouseCoopers, said the company hadn’t been notified of the lawsuit.

As of mid-March, the Brazilian government’s probe had already led to 40 indictments on racketeering, bribery and money-laundering charges, according to the complaint. Suppliers to the Rio de Janeiro-based energy company allegedly bribed executives to win contracts at projects ranging from refineries to offshore drilling rigs, according to court documents filed in Brazil.

Petrobras said it received a subpoena in November from the U.S. Securities and Exchange Commission requesting documents.

Petrobras has said it’s a victim in the scheme and is working to recover money lost to graft.

The case is In Re: Petrobras Securities Litigation, 14-cv-9662, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Patricia Hurtado in Federal Court in Manhattan at

Source: Bloomberg