b'Washington State Investment (ii) lack of adequate pleaded loss causation; (iii) failure Bd. v. Odebrecht S.A., 461 F. Supp. 3d 46to state a claim against Odebrecht Finance and (S.D.N.Y. 2020) Engenharia; (iv) lack of control person liability as to the officers; and (v) lack of actionable misstatements.After settling criminal charges with U.S., Swiss, andStatute of LimitationsBrazilian authorities in 2016, Brazil-based construc- The court first considered Defendants arguments that tion conglomerate Odebrecht S.A. (Odebrecht) andthe Section 10(b) and 20(b) claims were time-barred certain of its officers and directors were sued by U.S.under the applicable statute of limitations, which calls shareholders for securities fraud. In May 2020, the U.S.for commencement of an action no later than the earlier District Court for the Southern District of New Yorkof (a) two years following discovery of the facts consti-issued a lengthy opinion denying in part and granting intuting the violation or (b) five years after the violation. part Odebrechts motion to dismiss the securities fraudDefendants argued that the steady drumbeat of news action.coverage surrounding Odebrechts involvement in the The Scheme bribery scheme began back in 2014. However, the court Odebrecht was charged with an elaborate internationalfound that the coverage did not speak to Defendants bribery scheme initiated in 2006 through which approx- involvement specifically and thus was not sufficient to imately $788 million in bribes were paid to governmentstart the clock as to claims against those parties. officials to improperly influence the award of more thanLoss Causation100 large construction contracts in at least twelve coun- Defendants next argued that the Exchange Act claims tries throughout Central and South America and Africa.should be dismissed because Plaintiffs failed to allege Further, it was alleged that prior to 2006, Odebrechtthat market events caused Note values to decline, paid $349 million in bribes to various Brazilian offi- and thus failed to adequately plead loss causation. cials and political parties, and another $439 million toThe court rejected this argument as well, pointing to foreign officials and political parties in North America,Plaintiffs allegations connecting specific and undis-South America, and Africa. In total, Odebrecht realizedputed losses to various disclosures from Odebrecht, approximately $3.336 billion in ill-gotten profits.including the Notes 48% decline in value during On December 21, 2016, Odebrecht pleaded guilty inthe three months that followed news coverage of the U.S. District Court for the Eastern District of NewOdebrechts involvement in the bribery scandal.York to conspiring to violate the anti-bribery provi-sions of the FCPA. In connection with its guilty plea,Failure to State a ClaimOdebrecht agreed to pay a fine of $2.6 billion. As partWith regard to its argument that the Board failed to of Odebrechts guilty plea, it accepted responsibilitystate a Section 10(b) claim against it. Odebrecht argued for the acts of its affiliates, subsidiaries, officers, direc- that Norberto, one of the individual defendants, had tors, employees, and agents, including [Norberto].already accepted responsibility for the misstatements in his DOJ resolution, and thus Odebrecht could not The Action be deemed the maker of the statements. The court The securities action centers around statements madeagreed.by Defendants in connection with the marketing of various notes issued by Odebrecht (the Notes), theControl Person Liabilityvalue of which declined precipitously following publicIn light of the courts finding that Odebrecht could disclosure of Odebrechts misconduct in 2016. Thenot be held responsible for the admissions made by Amended Complaint (the Complaint) includes nineNorberto, the Court found that the Odebrechts officers causes of action: (i) violation of Section 10(b) of thecould not be liable for those statements as control Exchange Act and Rule 10b-5 against all Defendants;persons under Section 20(a). Without a primary offense (ii) violation of Section 20(a) of the Exchange Actby the entity, there could not be the derivative offense against Odebrecht and two individuals; (iii) two countsunder Section 20(a). of violations of the Washington State Securities Act; (iv) negligent misrepresentation against all Defendants; (v)Actionable Misstatementsfraud against all defendants; (vi) conspiracy against allLastly as to the Exchange Act claims, the court consid-Defendants; and (vii) two counts of violations of Newered whether Plaintiff set forth actionable misstate-Yorks Debtor and Creditor statute.ments by Norberto. At issue were statements in the Defendants moved to dismiss claims brought under theoffering memoranda for the Notes; specifically, a Exchange Act on numerous grounds, including (i) thatdescription of the process for new construction process the Section 10(b) and 20(a) claims were time-barred;as competitive, when it was actually rigged through bribery, and the accompanying financial disclosures. 38'