Sembcorp Marine shares fall as Brazil scandal resurfaces

The Sembcorp Marine logo pictured at a shipyard in Singapore, on May 23, 2019. PHOTO: REUTERS

Investors bailed out of Sembcorp Marine yesterday and sent its share price plunging after news that the firm was again embroiled in the huge anti-graft crackdown in Brazil.

The panic selling was triggered when SembMarine disclosed that a search warrant had been executed on one of its units in Brazil. The news sent the stock into free fall as investors rushed to offload their shares.

By the time the dust had settled on a frantic afternoon's trading, SembMarine stock was down 8.4 per cent at $1.41, with around 30 million shares changing hands. That was a remarkable increase on Tuesday's volume of 1.7 million and almost six times higher than its three-month average.

Its parent firm Sembcorp Industries took a hit as well, with the stock down 2.4 per cent.

Investors were clearly spooked by SembMarine being dragged back into a scandal it seemed to have put behind. The spectre of the firm being hit with the huge fines that rival Keppel Corp faced in 2017 would have unnerved many as well.

The firm released few other details yesterday, but it did note that the search warrant likely relates to investigations around Guilherme Esteves de Jesus, a former consultant who was engaged by the unit. It also said the probe involves the SembMarine unit's former president Martin Cheah Kok Choon, the first time a direct employee has been linked to the scandal.

It was disclosed last February that the Brazilian authorities had charged de Jesus over alleged illegal payments linked to drillship contracts won by SembMarine units. That investigation is part of what is known as Operation Car Wash, Brazil's biggest anti-graft crackdown that has already ensnared SembMarine rival Keppel Corp and sent former Brazilian president Luiz Inacio Lula da Silva to jail.

It began in 2014 with the discovery of documents outlining what appeared at first to be a low-level money-laundering operation centred on Brazilian petrol stations. But the investigation uncovered evidence of a huge kickback scheme involving hundreds of people and hundreds of millions of dollars.

The scam essentially involved rigged bids for contracts for drillships, oil rigs and other energy industry equipment for Brazilian energy giant Petrobras. It was found that huge amounts were being skimmed off the top for kickbacks to Petrobras officials, politicians and executives in other firms involved in the tender processes.

SembMarine is facing scrutiny over the US$5.5 billion (S$7.5 billion) of contracts it won from Sete Brasil, a firm linked to Petrobras.

The Keppel Offshore & Marine unit said in 2017 it had to pay US$422 million in fines for corrupt payments made to win contracts, following probes in Brazil, the United States and Singapore.

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A version of this article appeared in the print edition of The Straits Times on July 04, 2019, with the headline Sembcorp Marine shares fall as Brazil scandal resurfaces. Subscribe