SEC and DOJ Looking at Petrobras

In a Deutsche Bank Markets Research note out this morning, analyst Alexander Burgansky said that "Yesterday, Petrobras

announced that on 21 November 2014 it received a subpoena from the US Securities and Exchange Commission (SEC) requesting certain documents relating to the SEC's investigation of the company" Separately, Reuters reported yesterday that Petrobras is also being investigated by the US Department of Justice,which looks into the potential violation of the US Foreign Corrupt Practices Act. According to Mr. Burgansky, the investigation is a follow on to the “Lava Jato Operation”, conducted by the Brazilian Federal Police, which uncovered alleged corrupt practices at Petrobras. He goe son to say "On 8 October 2014, the testimonies of former Petrobras Downstream Executive Director, Paulo Roberto Costa, and Mr. Alberto Youssef disclosed information regarding alleged overpayment for supplies of goods and services by Petrobras and related kickbacks received by some of the Petrobras officials, allegedly used for the funding of political activities. It appears to us that the SEC and DOJ investigations represent the steps taken by the US authorities on the back ofthe revelations of the “Lavo Jato Operation. " The Wall Street Journal recently reported that the alleged corruption scheme at Petrobras may have totaled $1.6bn. Shares of PBR are higher in pre-market trade at 11.14, up 5.5 percent. off the historic lows of 8.80 from last Wednesday.