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Federal police have alleged that three Bradesco executives were part of a tax fraud scheme.
Banco Bradesco was sued on Friday in a U.S. court by shareholders who accused the Brazilian lender of fraudulently concealing its involvement in a bribery scheme, an alleged effort to avoid a US$850 million tax fine, and weaknesses in its internal controls.
The lawsuit was filed in the U.S. District Court in Manhattan on behalf of holders of Bradesco's American depositary shares, and seeks class-action status on behalf of ADS investors between April 30, 2012, and May 31, 2016.
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Shareholders led by William Bryan said Brazil's second largest private lender inflated its share price by making a series of false and misleading statements and concealing its improper activities, and that the price fell when the truth became known.
Had the investors known that truth, "they would not have purchased Banco Bradesco's ADSs at the artificially inflated prices that they did, or at all," the complaint said.
Brazilian federal police have accused Chief Executive Officer Luiz Carlos Trabuco and two other senior executives of plotting to avoid the tax fine.
Federal police also requested prosecutors to indict 10 suspects in connection with the Bradesco investigation, including employees and former employees of Brazil’s tax agency and people who allegedly served as intermediaries.
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The prosecutor is expected to take at least 30 days to decide whether to charge the bank employees, and the intermediaries who allegedly negotiated bribes, federal prosecutor Frederico Paiva said.
Mr. Paiva said the act of negotiating bribes is a crime under Brazilian laws and can be punished by up to 12 years in jail.
It has since more than recovered that decline, closing on Friday at $6.77.
In a statement on Friday, Bradesco said the share price changes were not large enough to justify the investors' lawsuit, which also names Trabuco and others as defendants.
Bradesco has vowed to fight the accusations against Trabuco, saying it had been acquitted in prior rulings.
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