CVM trial of Vale Executives over Brumadinho Dam Collapse brings new momentum
Fabio Schvartsman and Gerd Peter Poppinga attended a Securities and Exchange Commission (CVM) trial session, last Tuesday, October 1st. Poppinga was convicted by one of the CMV directors, but the second CMV director requested more time to review the case files, postponing the judgment by 60 days. Victims’ families and supporters will have to keep waiting for justice regarding one of Brazil’s worst human and environmental disasters.
Fabio Schvartsman and Gerd Peter Poppinga attended a Securities and Exchange Commission (CVM) trial session, last Tuesday, October 1st. Poppinga was convicted by one of the CMV directors, but the second CMV director requested more time to review the case files, postponing the judgment by 60 days. Victims’ families and supporters will have to keep waiting for justice regarding one of Brazil’s worst human and environmental disasters.
Five years after the Brumadinho dam collapse tragedy, that killed 272 people and caused severe environmental damage, the CVM began the hearings of former CEO of Vale S.A. (VALE3), Fabio Schvartsman, and former director of ‘Ferrosos e Carvão’, Gerd Peter Poppinga, both accused of negligence and failing to disclose crucial information that could have potentially prevented the disaster.
The CVM is the regulatory authority over business conduct and market regulation with responsibility to protect investors, ensure public information, supervise securities markets and sanction misconduct. The proceedings last Tuesday result from complaints filed in 2019, including by critical shareholders of the mining company from the International Network of People Affected by Vale. According to those complaints, Schvartsman and Poppinga failed to fulfil their duties as Vale executives, which could have prevented the disaster. The accusation is based on regulations for publicly traded companies, which require full and transparent disclosure of all relevant information so that investors can assess business risks.
Similarly, in 2023,ValeS.A. already faced a case filled with the Securities and Exchange Commission (SEC), in the United States, for misleading public information disclosure on the company’s infrastructures safety standards, which resulted in a US$ 55,9millionsettlement.
5 years should be enough to get justice
The CMV director Maeda voted to convict Poppinga to a penalty of R$ 27 million (US$4,97 million), highlighting his duty to be informed and oversee the company’s operations. However, Schvartsman was acquitted because his responsibilities as the company CEO did not include direct oversight of the dam, according to the CMV director.
Although four additional CVM directors were expected to vote, the second to speak, Otto Eduardo Fonseca Lobo, requested time to review the case, suspending the trial. The trial should resume within a maximum of 60 working days.
For this session, representatives from the victims’ family organisation AVABRUM and a long-term supporting organisation, Instituto Cordilheira, travelled more than 450km from Minas Gerais to the CVM’s headquarters in Rio de Janeiro looking for justice, though, they had to face another delay in their pursuit for corporate accountability.
Both ENDS partners call for accountability
"It was very important to recognize Poppinga's responsibility, as he has not yet been charged in criminal proceedings. We hope the CVM directors who have yet to vote will reassess Schvartsman’s situation. There are police investigations with robust evidence showing Schvartsman's inaction and questionable conduct regarding the dam safety," said Danilo Chammas, a lawyer for AVABRUM and a member of Instituto Cordilheira.
Moreover, at 2018 Vale's AGM, questions were raised about the non-implementation of the company's own program "Barragem Zero/ Zero Dam" that highlighted the need for action to ensure the safety of the Brumadinho collapsed dam since 2009. The former president Fabio Schvartsman was present at that meeting.
AVABRUM and Instituto Cordilheira have played an important role in defending the rights and interests of the families who lost loved ones in the dam collapse, closely monitoring the investigations and the administrative, civil, and criminal proceedings to hold those responsible accountable, and prevent future tragedies.
For that, both organisations are part of a coalition responsible for the ‘Observatory of Criminal Actions on the Brumadinho Tragedy’, an initiative aimed at helping the victims’ families and other stakeholders to follow and understand the progress of judicial and administrative processes underway in Brazil and Germany.
Both ENDS has supported the great advocacy work done by our Brazilian partners by amplifying their message of corporate accountability, justice for the affected people and prevention of similar disasters, by engaging with the European, namely, the Dutch investors in Vale S.A. and other relevant stakeholders.
Background of the Brumadinho tragedy
On January 25, 2019, Brazil witnessed one of the largest human and environmental disasters in its history. The B1 Dam of the Córrego do Feijão Mine, operated by Vale S.A., collapsed in Brumadinho, in the metropolitan region of Belo Horizonte, Minas Gerais state. Killing 272 people, with three victims still missing.
The dam collapse also released 12 million cubic meters of iron ore tailings which caused an enormous environmental devastation due to the contamination of the Paraopeba River, impacting 26 municipalities in the Paraopeba Basin.
Since the disaster, Vale S.A. and TÜV SÜD, the German company responsible for the dam’s safety certification, have faced criminal charges due to an alleged failure to report the dam’s safety problems. In January 2020, the Public Prosecutor’s Office of the State of Minas Gerais (MPMG) charged 16 individuals, including the former Vale CEO Schvartsman, with homicide and environmental crimes. In 2023, this criminal case was referred to the Federal court and, so far, those responsible for the irreplaceable loss of human lives have not been judged.
Why do Dutch investors still believe in Vale S.A.?
Vale S.A. has a disconcerting track record in dam disasters and criminal charges that started with a dam collapse in Mariana, Minas Gerais, in 2015, which resulted in two ongoing lawsuits in The Netherlands and United Kingdom.
Nevertheless, Vale still manages 27 mining dams currently operating under emergency protocols in Minas Gerais, with 2 dams under “Level 3” threat which indicates an imminent risk of rupture. The company was fined US$ 46 million for failing the legal deadline to decommission all upstream mining dams by 2022, extending the risk of a new disaster to 2035.
Despite Both ENDS engagement work over the years, Dutch pension funds such as ABP, BpfBOUW, SPW, Detailhandel and, also, Aegon, ING Group, Optiver and FundShare Fund Management remain invested in Vale.
Hoping for a better Vale conduct, will not provide justice for the past nor prevent a new disaster in the future. Both ENDS will continue to call on these investors to divest from the company and engage with civil society organisations and local communities together to steer the mining industry towards the best practices on safety standards, environmental preservation, respect for human rights and corporate accountability.
For more information
