Mining Company Agrees to Pay US$56 Million to Settle SEC ESG Disclosure Suit
March 31, 2023
On March 28, 2023, the US Securities and Exchange Commission (SEC) announced that Vale S.A., a Brazilian mining company and one of the world’s largest iron ore producers, has agreed to pay US$56 million to settle charges that it failed to alert investors about safety issues ahead of the collapse of one of its Brazilian mines. As noted in our prior client alert, in April 2022, the SEC charged Vale with violating antifraud and reporting provisions of federal securities laws by making allegedly false and misleading statements about dam safety in the company’s sustainability reports and other environmental, social, and governance (ESG) disclosures. The settlement, which remains subject to court approval, requires Vale to pay a civil penalty of US$25 million, disgorgement of US$25 million, and pre-judgment interest of US$5.9 million, and would permanently restrain and enjoin Vale from violating the Securities Act of 1933 and the Securities Exchange Act of 1934.
The charges against Vale stem from the 2019 collapse of the company’s Brumadinho dam, which resulted in 270 deaths, released nearly 12 million cubic tons of mining waste into the environment, and led to a loss of more than US$4 billion in Vale’s market capitalization. The SEC alleged that Vale manipulated dam safety audits, obtained fraudulent dam stability certificates, and misled investors about the safety of the Brumadinho dam through the company’s ESG disclosures, including its voluntary annual sustainability reports and ESG-related investor presentations and webinars. The SEC further alleged that Vale knew that the Brumadinho dam did not meet internationally recognized dam safety standards, but, nonetheless, stated in its ESG disclosures that it adhered to the “strictest international practices” in evaluating dam safety and that 100 percent of its dams were certified to be in stable condition.
The Vale settlement highlights the need for publicly traded companies to work with counsel and carefully review their voluntary sustainability reports and other ESG-related disclosures to ensure that they consistently and accurately portray the company’s activities and regulatory compliance status. The SEC continues to pay increased attention to this area, and more ESG-related enforcement actions will likely follow.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. John Rousakis, an O'Melveny partner licensed to practice law in New York, Andrew J. Geist, an O'Melveny partner licensed to practice law in New York, John D. Renneisen, an O'Melveny senior counsel licensed to practice law in the District of Columbia, Eric Rothenberg, an O'Melveny of counsel licensed to practice law in New York and Missouri, Robert Plesnarski, an O'Melveny partner licensed to practice law in the District of Columbia and New York, Michelle Earley, an O'Melveny partner licensed to practice law in Texas, and Shelly Heyduk, an O'Melveny partner licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
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