A Brazilian investor relations professional who allegedly misled the market by falsely claiming that Warren Buffett’s Berkshire Hathaway Inc. was investing in his company is being sanctioned in a settlement with the U.S. Securities and Exchange Commission (SEC).
The SEC obtained a final consent judgment against Fernando Passos, former executive vice-president of finance and investor relations for a Brazilian reinsurer, IRB Brasil Resseguros S.A. (IRB), for breaching U.S. securities rules by allegedly crafting a false story and disseminating false documents, which claimed that Berkshire Hathaway had made a substantial investment in the company.
According to the SEC’s complaint, in early 2020, in response to a report from a Brazilian asset manager that was short IRB — which raised questions about the company’s financial results and prompted a drop in its stock — Passos sought to boost the company’s stock price and restore investor confidence by falsely claiming that Berkshire Hathaway was investing in its stock.
Specifically, the regulator alleged that Passos fabricated a list of shareholders that purported to show that Berkshire had purchased IRB stock, disseminated that list in an effort to gain media coverage of the claim, and made false statements to several investors and an analyst about that alleged investment.
Those efforts temporarily boosted the company’s share price by more than 6%, before Berkshire publicly denied the reports, and the stock fell by more than 40%, the regulator noted.
The SEC also alleged that in an effort to cover up the deception, Passos claimed that he’d received the fake shareholder list from IRB’s custodian bank that was overseeing its share ownership.
Without admitting or denying the allegations, Passos consented to the entry of the final judgment, which imposes a US$500,000 penalty and bars him from serving as an officer or director of a public company.
In 2023, IRB settled with the U.S. Department of Justice. As part of a non-prosecution agreement, the company agreed to pay US$5 million in compensation to former IRB shareholders, and it admitted that the scheme constituted securities fraud.
After the scheme was exposed, on March 4, 2020, both Passos and the company’s CEO resigned.