Brazil-based petrochemical giant Braskem said last week in a filing with the U.S. Securities and Exchange Commission that it has launched an internal investigation into allegations of “improper payments” related to an ethane supply project in Mexico.
The allegations were first published by Mexico news media and included in the testimony of the former CEO of Mexican state-owned oil company Petróleos Mexicanos (Pemex) to the attorney general of Mexico, Braskem said in its filing, first reported by FCPA Tracker. In response, Braskem said it has approved the hiring of a U.S. law firm “with proven experience in similar cases to conduct an independent internal investigation of the allegations.”
Without going into any further detail, the filing stated the allegations and investigation concern Braskem’s indirect subsidiary Braskem-Idesa (a company made up of Odebrecht-controlled Braskem and Grupo Idesa) and its ethane supply contract with Pemex, and specifically has to do with a plant known as “Ethylene XXI.”
Last year, Reuters reported current Mexican President Andrés Manuel López Obrador was reviewing whether the contract between Braskem-Idesa and Pemex can be legally canceled, calling it “unfair.” Under the terms of the contract, which were agreed upon during the tenure of former Mexican President Felipe Calderón, Pemex has had to supply ethane well below current market prices to Ethylene XXI, according to Reuters.
Because the investigation remains ongoing, Braskem said in its filing it cannot estimate at this time when the probe will conclude, nor the outcome or impacts, if any, it will have on its individual and consolidated financial statements.
In its independent auditor’s report on Braskem’s financial statements, Grant Thornton concluded, “Based on the auditing procedures performed and evidence obtained, we considered that the methodologies and assumptions used by the company in the disclosure of going concern and investigations in progress of Braskem Idesa are acceptable in the context of the financial statements taken as a whole.”
Braskem and Odebrecht have a history of corrupt behavior. In December 2016, the two companies pleaded guilty and agreed to pay a combined total penalty of at least $3.5 billion to resolve charges with authorities in the United States, Brazil, and Switzerland arising out of their schemes to pay hundreds of millions of dollars in bribes to government officials around the world.