Gerdau SA (ADR) (NYSE:GGB) is the subject of a class action suit in the US over allegations it -misled investors by issuing materially misleading business information. The lawsuit filed by law firm Pomerantz LLP alleges the Brazilian steelmaker lied about its tax liabilities as part of an ongoing corruption investigation.
Other law firms suing the company on behalf of shareholders include Khang & Khang LLP, Bronstein, Gewirtz & Grossman, LLC and Levi & Korsinsky, LLP.
The class action lawsuit by Pomerantz LLP covers entities and persons who purchased Gerdau shares between June 2, 2011, and May 15, 2016. The law firm alleges that during this period, the company provided false and misleading statements regarding its business, operational and compliance policies.
Pomerantz accuses officials of failing to notify investors that the firm was being investigated over claims it tried to defraud tax authorities $429 million. The company’s CEO, Andre Bier, Gerdau among other directors and employees are also accused of engaging in bribery and money laundering schemes.
Last year, Brazilian authorities confirmed the discovery of a multibillion-tax fraud at the Ministry of Finance. It is alleged that as many as 70 companies had bribed officials at the ministry for waivers on certain amounts owed.
A publication appearing on one of the Brazilian newspapers in December named Gerdau as one of the perpetrators of the scheme. The report immediately sent the company’s stock crushing in the market by as much as 6.96%.
Early this year, the company’s offices were raided as part of an operation involving 18 search warrants. A confirmation that the company would delay the release of its fourth quarter earnings on February 29, 2016, all but confirmed investor’s suspicion on the ongoing scandal.
Gerdau SA (ADR) (NYSE:GGB) on its defense insists it has never authorized the use of its name for illegal negotiations. Pomerantz on its lawsuit maintains it is only trying to recover damages against defendants affected by the scandal.