Brazilian Mining Company To Pay $55.9 Million To Settle SEC Charges Of Misleading ESG Disclosures
On March 28, 2023, the Securities and Exchange Commission (“SEC”) submitted a settlement agreement (“settlement”) to the United States District Court of the Eastern District of New York with Brazilian mining company Vale S.A. (“Vale” or “Company”). Under the settlement, without admitting or denying the findings, the Company will pay a total of $55.9 million to resolve charges brought against it by the SEC on April 28, 2022, regarding the Company’s allegedly false and misleading representations in its environmental, social, and governance (“ESG”) disclosures. The SEC averred in its complaint that the Company concealed the unsafe condition of its dams, which caused its ESG disclosures to be materially false and misleading for investors. See SEC v. Vale S.A., Case No. 22-cv-2405-LDH-SJB (Mar. 28, 2023).
According to the SEC, between August 2016 and January 2019, the Company purportedly obtained fraudulent declarations stating that its dams were stable, including its Brumadinho dam, which collapsed on January 25, 2019, killing 270 people and releasing nearly 12 million cubic tons of mining waste.
In particular, the SEC claimed that the Company obtained stability declarations by using unreliable data, concealed material information from the dams’ safety auditors, ignored best practices and minimum safety standards, suppressed findings from its own experts, and made false and misleading statements to investors. Based on this alleged conduct, the SEC charged the Company with violations of Section 17(a) of the Securities Act, Sections 10(b) and 13(a) of the Securities Exchange Act, and Rules 10b-5, 12b-20, 13a-1, and 13a-16.
Under the settlement, the Company agreed to pay a civil penalty of $25 million, $25 million in disgorgement, and $5.9 million in pre-judgment interest (totaling $55.9 million owed). Further, the Company would be subject to a permanent injunction from violating the Securities Act of 1933 and the Securities Exchange Act of 1934.
The SEC Associate Director of the Enforcement Division, Mark Cave, responded to the settlement by saying that “[o]ur action against [the Company] illustrates the interplay between the company’s sustainability reports and its obligations under the federal securities laws. … The terms of today’s settlement … 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.” This settlement underscores the increased global regulatory interest in ESG initiatives and disclosures and reflects the SEC’s stated desire to pursue misrepresentations in ESG disclosures. Issuers are reminded to fund and maintain effective compliance processes designed to ensure ESG-related disclosures are accurate.