Litigation: SEC Settles Fraud Charges Against Brazilian Reinsurance

Targeted News Service

WASHINGTON, May 11 -- The Securities and Exchange Commission issued the following litigation release (No. 1:23-cv-03905; S.D.N.Y. filed May 9, 2023) involving IRB Brasil Resseguros S.A.:

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The Securities and Exchange Commission today announced that IRB Brasil Resseguros S.A., a publicly-traded Brazilian reinsurance company, agreed to a civil injunction to settle charges that the company had planted a false story with the media and disseminated false documents in order to influence IRB's stock price.

According to the SEC's complaint, filed in the United States District Court for the Southern District of New York, in February 2020 after a significant decline in IRB's stock price following a short seller's report questioning IRB's financial results, IRB and its former executive vice president of finance and investor relations, Fernando Passos, spread a fabricated story that Berkshire Hathaway Inc. had recently invested in IRB. The complaint alleges that IRB, through Passos, created and shared a fake shareholder list that showed Berkshire had made substantial purchases of IRB stock. The complaint further alleges that IRB communicated the false information to analysts and investors during meetings in both the United Kingdom and the United States. According to the complaint, IRB's stock price rose by more than 6 percent following the Brazilian and U.S. media reports that Berkshire had invested in IRB and subsequently dropped by more than 40 percent after Berkshire denied that it was an investor. Following Berkshire's denial, IRB conducted an internal investigation; shared the results with SEC staff; and fully cooperated with the SEC's investigation. IRB also took extensive remedial measures, including replacing senior management; replacing and expanding its Board of Directors; and implementing processes and procedures designed to prevent this type of misconduct from occurring in the future.

IRB consented to the entry of a final judgment, subject to court approval, which would permanently enjoin it from violating the antifraud provisions of Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder. Due in part to the company's significant cooperation and remediation in this matter, the SEC did not impose a penalty as part of its settlement with the company. On April 18, 2022, the SEC charged Passos with violating the antifraud provisions of the Exchange Act and is seeking civil monetary penalties, as well as an officer-and-director bar, against him.

The SEC's investigation was conducted by Jeffrey Lyons and supervised by Ian Karpel, Nicholas Heinke, and Jason Burt of the Denver Regional Office, with the assistance of trial counsel Zachary Carlyle under the supervision of Gregory Kasper.