Petrobras CEO Steps Down Amid Corruption Scandal

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – After months of scandals which have led to a strong devaluation of Petrobras’ shares and a downgrade by a major credit rating company, its CEO, Maria das Graças Foster, resigned this morning (February 4th) after rumors flew around yesterday about her leaving at the beginning of March. In addition to Foster five board members also handed in their resignations.

Brazil’s national daily, O Globo, reported that Foster’s departure was sealed during a meeting with President Dilma Rousseff on Tuesday, in Brasília, despite the silence coming from the President’s office and top government officials.

As rumors spread about Foster’s resignation, Petrobras’ shares surged, rising by more than fifteen percent on February 3rd, the biggest appreciation for the company’s shares in a single session in sixteen years. The next morning the company’s shares appreciated another eight percent after the announcement.

On Petrobras’ website the news of the resignation of the oil giant’s CEO was timid. The website announced the resignation as ‘Changes in Administration’ stating that the current Administration Council will meet on Friday, February 6th, to elect the new board ‘due to the resignation of its CEO and five directors’. In the English version of the website there is no mention of the resignations.

Foster had been under pressure to resign since the Operação Lava Jato (Carwash Operation) was revealed in March of 2014. Federal prosecutors say Petrobras executives received at least R$2.1 billion (US$800 million) in kickbacks from companies interested in winning contract bids with the country’s oil giant in the widespread corruption scheme. Foster is said to have tried to hand in her resignation twice before, only to have them refused by President Rousseff.

Last week, during a teleconference to announce third quarter corporate results for 2014, the CEO admitted that the company does not yet have a final tally on the losses incurred due to the money-laundering scheme, but that it was in the billions of dollars range.

In all, more than 232 companies, including some of the country’s largest construction and engineering firms as well as 150 executives and Petrobras directors have been or are being investigated. According to officials more than eighty people have been charged with corruption in the case. Twelve of those investigated have agreed to help investigators in exchange for reduced sentences.

*Note: This article was updated to include recent events.