Brazilian mining company Vale was accused by the Securities and Exchange Commission (SEC) on Thursday of making false and misleading safety audit and disclosure claims prior to the January 2019 collapse of its Brumadinho dam.

Public documents filed with the SEC between October 2016 and December 2018 claimed, “Vale had not identified any anomalies with the dams and that its independent stability declarations were in compliance with Brazilian regulations and international best practices,” the agency stated in its complaint.

These disclosures included periodic filings; presentations; sustainability reports; and environmental, social, and governance (ESG) webinars. The SEC said it determined the representations to be false.

“[B]etween August 2016 and January 2019, Vale fraudulently obtained eight positive stability declarations for the Brumadinho dam in connection with each of the several different audits that occurred in this period,” the SEC stated. “To obtain these stability declarations, Vale suppressed adverse information about the dam, used flawed and unreliable data to perform safety analyses, strong-armed independent auditors, and ignored international safety standards and best engineering practices that it claimed to follow.”

These actions occurred following the 2015 collapse of the Mariana dam, which Vale co-owned. In the aftermath of that disaster, Brazilian authorities issued new and updated dam safety regulations and specifically placed requirements on Vale to evaluate its high-risk dams.

The Brumadinho dam collapse killed 270 people and led to a loss of more than $4 billion in Vale’s market capitalization, the SEC noted in a press release. The company’s American depositary shares and notes trade on the New York Stock Exchange.

The SEC’s complaint, filed in U.S. District Court for the Eastern District of New York, charges Vale with violating antifraud and reporting provisions of federal securities laws and seeks injunctive relief, disgorgement plus prejudgment interest, and civil penalties.

The complaint also accused Vale of:

  • Improperly obtaining stability declarations for the dam by knowingly using unreliable laboratory data;
  • Concealing material information from its dam safety auditors;
  • Disregarding accepted best practices and minimum safety standards;
  • Removing auditors and firms who threatened Vale’s ability to obtain dam stability declarations; and
  • Making false and misleading statements to investors.

“Many investors rely on ESG disclosures like those contained in Vale’s annual sustainability reports and other public filings to make informed investment decisions,” stated Gurbir Grewal, director of the SEC’s Division of Enforcement. “By allegedly manipulating those disclosures, Vale compounded the social and environmental harm caused by the Brumadinho dam’s tragic collapse and undermined investors’ ability to evaluate the risks posed by Vale’s securities.”

In a statement, Vale denied the SEC’s allegations, “including the allegation that its disclosures violated U.S. law,” and said it would “vigorously defend” the case.