NEW YORK, April 18 (Reuters) – U.S. authorities on Monday charged a former senior executive at IRB Brasil Resseguros SA (IRBR3.SA) with fraudulently planting a false story that Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) had made a significant investment in the Brazilian reinsurer.
In a civil complaint filed in federal court in Manhattan, the U.S. Securities and Exchange Commission (SEC) said Fernando Passos, then IRB’s chief financial officer, fabricated the story in early 2020 to prop up IRB’s stock price, which had recently slid after a short seller questioned the company’s financial results.
The SEC said Passos, of Sao Paulo, fabricated a fake shareholder list showing that Berkshire had bought 28 million IRB shares, then worth around $800 million, and spread news of the stake to investors, an analyst and later the press.
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Passos also faces related criminal charges from the U.S. Department of Justice, the SEC said. He did not immediately respond to a request for comment. Berkshire and IRB did not immediately respond to similar requests.
IRB shares rose 6.7% on Feb. 27, 2020, after news of a bogus Berkshire stake became public, reflecting the supposed vote of confidence from Buffett, whose conglomerate owns several insurers including Geico car insurance and General Re reinsurance.
The shares plunged 43% over two days after Berkshire said on March 3, 2020, it was not, had never been and had no intention of becoming an IRB shareholder.
The SEC said Passos responded to Berkshire’s denial “with the Portuguese equivalent of ‘Damn’ and ‘We’re (expletive)!’” before trying to conceal his conduct by telling IRB directors that the company’s custodian bank had provided the shareholder list.
IRB announced on March 4, 2020 that Passos and Chief Executive Jose Carlos Cardoso had resigned.
Brazil’s securities regulator, the CVM, last November said it would file civil charges accusing Passos of market manipulation and Cardoso of releasing false information to the market.
In June 2020, IRB restated its 2019 financials to address accounting irregularities, reducing net income by 31%.
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Reporting by Jonathan Stempel in New York; Additional reporting by Aluisio Alves in Sao Paulo; editing by Jonathan Oatis and Bill Berkrot
Our Standards: The Thomson Reuters Trust Principles.
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