Vale CFO should face criminal indictment for dam, panel says
A Brazilian Senate committee is expected to recommend that 12 current and former executives of Vale SA, including Chief Financial Officer Luciano Siani and ex-Chief Executive Officer Fabio Schvartsman, face criminal indictments for a fatal dam disaster in January.
The rapporteur of the committee proposed the indictments Tuesday after a 2-1/2-month congressional inquiry into the causes of the dam break that left at least 246 people dead and unleashed a sea of mud over the city of Brumadinho, where Vale had an inactive iron ore mine. His report says the company was negligent and its risk and compliance controls were flawed.
If approved, as expected, the report will be sent to several Brazilian authorities, including federal and state police and prosecutors, as well as the governor of Minas Gerais and the ministries of energy and environment. The report, which will be voted on by the committee on July 9, has political weight and sends a message from lawmakers to their electorate, but it will be up to the authorities to decide on legal action.
“Vale respectfully disagrees with the recommendation for indictment,” it said in a statement Tuesday. “The company considers it necessary that a scientific and technical conclusion be reached on the cause of the disaster before criminal culpability is determined. Vale and its employees will continue to cooperate with authorities to determine the cause of the dam breach.”
The panel also recommended a special participation tax of as much as 40% on highly profitable miners. Shares of the world’s largest iron ore producer tumbled 4.2% to 51.39 reais, the worst performer on the 66-member Ibovespa index in Sao Paulo.
Vale’s attempt to reduce costs resulted in heightened tolerance for risks, according to the report, which recommends criminal indictments for homicide, bodily injury and environmental damage. It also suggests that authorities continue investigating Vale and its executives.
The report also recommends indictments for two people from TUV SUD, which Vale hired to inspect the dam.
Federal prosecutors of Minas Gerais are already investigating Vale in cases that are running under secrecy. They haven’t criminally charged anyone yet. In Brazil, prosecutors and police can both recommend criminal action to a judge.
“As expected, the first version of the investigation report about the Brumadinho accident would have a punitive in nature,” said Bradesco BBI’s analyst Thiago Lofiego, in a report from July 2. “While we do believe that mining sector legislation is likely to change in Brazil, we do not think the highly punitive proposals in question will materialize,” Bradesco analysts said, referring to the tax.
The levy would be “very negative” for Vale, said Leonardo Rufino, a partner and portfolio manager at Pacifico Gestao de Recursos, which oversees about 2 billion reais ($520 million) in assets.
(By Maria Luiza Rabello, Sabrina Valle and Vinícius Andrade)