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Brazilian mining company to pay $56M to settle SEC charges involving dam safety

On Behalf of | Apr 13, 2023 | Regulatory Investigations

A Brazilian mining company has agreed to pay nearly $56 million to settle charges related to disclosures over the safety of its dams, the Securities and Exchange Commission announced.

The SEC said it had reached the settlement in the case involving Vale S.A., a publicly traded company and one of the world’s largest iron producers. In April 2022, the commission filed a complaint in federal court alleging that Vale made false and misleading disclosures about the safety of its dams before the collapse of the Brumadinho dam that killed 270 people in January 2019.

The SEC alleged that Vale manipulated dam safety audits, obtained fraudulent stability certificates and misled governments, communities and investors about the safety of the Brumadinho dam through its environmental, social and governance (ESG) disclosures. Furthermore, it was alleged that Vale knew the dam did not meet internationally recognized dam safety standards, yet continued to fraudulently assure investors that the company adhered to the strictest safety practices while claiming that all its dams were certified to be in stable condition. The complaint stated that Vale raised over $1 billion in debt markets while misleading investors and concealing the economic and environmental risks posed by the dam.

The company was charged with violating antifraud and reporting provisions of the federal securities laws.

“Our action against Vale illustrates the interplay between the company’s sustainability reports and its obligations under the federal securities laws,” said Mark Cave, Associate Director of the SEC’s Division of Enforcement. “The terms of today’s settlement, if approved by the court, will levy a significant financial penalty against Vale and demonstrate that public companies can and should be held accountable for material misrepresentations in their ESG-related disclosures, just as they would for any other material misrepresentations.”

Under the settlement, Vale will be required to pay a civil penalty of $25 million and disgorgement and pre-judgment interest of $30.9 million and would also be permanently restrained and enjoined from violations of the Securities Act of 1933 and of the Securities Exchange Act of 1934.

The settlement, remains subject to approval by the U.S. District Court for the Eastern District of New York.

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