According to the complaint, Gerdau produces and commercializes steel products worldwide. Gerdau operates through Brazil Business Operation, North America Business Operation, South America Business Operation, and Special Steel Business Operation segments.
The complaint alleges that throughout the Class Period, the defendants made false and/or misleading statements, as well as failed to disclose material adverse facts about the company’s business, operations, and prospects. Specifically, the complaint alleges that the defendants made false and/or misleading statements and/or failed to disclose that: (i) the company was engaged in a bribery scheme in collusion with Brazil’s Board of Tax Appeals (“CARF”); (ii) Gerdau had defrauded Brazilian tax authorities of roughly $429 million in taxes; (iii) Gerdau’s CEO, André Bier Gerdau Johannpeter (“Johannpeter”), and other directors and employees of the company had engaged in bribery, money laundering, and influence peddling; and (iv) as a result of the foregoing, the defendants’ statements about Gerdau’s business, operations, and prospects were false and misleading and/or lacked a reasonable basis.
On or about March 26, 2015, Brazilian authorities announced that a Federal Police Investigation, dubbed Operation Zelotes, had uncovered a multibillion-dollar tax fraud scheme at the Ministry of Finance, reporting that as many as 70 companies had bribed members of the CARF to obtain favorable rulings that recused or waived the amounts that the companies owed. On or around March 29, 2015, it was reported that Gerdau was among the companies under investigation.
On December 4, 2015, the Brazilian publication Jornal do Comércio reported that a report by a committee of the National Congress of Brazil had named Gerdau, along with other companies, as a beneficiary of a tax evasion scheme. Following this news, Gerdau’s ADR price fell $0.11, or 6.96%, to close at $1.47 on December 4, 2015.
Then, on or around February 25, 2016, post-market, Brazilian police raided Gerdau offices in connection with Operation Zelotes. Johannpeter was among the individuals ordered to testify by day’s end. In an e-mailed statement, Gerdau stated that the company had never authorized the use of its name in illegal negotiations and that the company abided by ethical standards. Following this news, Gerdau’s ADR price fell $0.03, or 3.16%, to close at $0.92 on February 25, 2016.
Finally, on May 16, 2016, various news outlets reported that Brazil’s federal police had accused Gerdau of evading $429 million in taxes and indicted a total of 19 Gerdau personnel, including Johannpeter and some of the company’s executives, directors and lawyers, on corruption-related charges including bribery, money laundering, and influence peddling. Following this news, Gerdau’s ADR price fell $0.13, or over 7%, to close at $1.72 on May 16, 2016.
If you are a member of the class described above, you may no later than July 25, 2016 move the Court to serve as lead plaintiff of the class, if you so choose.
A lead plaintiff is a representative party that acts on behalf of other class members in directing the litigation. In order to be appointed lead plaintiff, the Court must determine that the class member’s claim is typical of the claims of other class members, and that the class member will adequately represent the class. Your ability to share in any recovery is not, however, affected by the decision whether or not to serve as a lead plaintiff. Any member of the purported class may move the court to serve as a lead plaintiff through counsel of their choice, or may choose to do nothing and remain an inactive class member.
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