Court Assigned: The case of United States v. Fernando Passos, No. 4:21-cr-028, is assigned to U.S. District Judge Rebecca Goodgame Ebinger, U.S. District Court for the Southern District of Iowa, United States Courthouse, 123 East Walnut Street, Des Moines, IA 50309.
Overview of United States v. Fernando Passos: Fernando Passos, a citizen of Brazil and the former Chief Financial Officer of IRB Brasil Resseguros SA a/k/a IRB Brasil RE (“IRB”), was initially indicted on February 17, 2021, in the Southern District of Iowa, with one count of securities fraud, in violation of 15 U.S.C. §§ 78j(b) & 78ff and 17 C.F.R. § 240.10b-5, and three counts of wire fraud, in violation of 18 U.S.C. § 1343. On November 16, 2021, the government obtained a superseding indictment charging Passos with the same four counts. The charges stem from the defendant’s alleged role in a scheme to fraudulently prop up IRB’s stock price by spreading false information regarding a purported investment in IRB by U.S. investment firm, Berkshire Hathaway. Specifically, in early February 2020, IRB, a publicly traded reinsurance company based in Brazil, was the subject of a short report questioning its accounting practices. The report caused IRB’s stock to drop. In response, the defendant allegedly created a scheme wherein he spread materially false information that Berkshire Hathaway had invested in IRB. To perpetuate the scheme, Passos allegedly falsified investor lists, created fake emails between IRB and Berkshire, which were circulated to members of the press and IRB directors, and provided false information in calls and meetings with investors. On the evening of March 3, 2020, Berkshire Hathaway issued a press release stating it had never been an IRB shareholder and had no intention of being one in the future. On March 4, 2020, IRB’s stock price dropped, causing significant shareholder losses.
Overview of IRB Resseguros SA Non-Prosecution Agreement: On April 20, 2023, IRB Brasil Resseguros SA, aka IRB Brasil RE (IRB) and the United States Department of Justice, Criminal Division, Fraud Section, entered into a non-prosecution agreement (NPA) and agreed to pay $5 million in victim compensation to resolve the government’s investigation into a securities fraud scheme, executed by its former CEO, Fernando Passos, to fraudulently prop up IRB’s stock price by spreading false information that U.S. investment firm Berkshire Hathaway Inc. had invested in the company.
As part of the NPA, IRB admitted and acknowledged that the facts described in the NPA constitute a violation of law, specifically securities fraud. Under the terms of the NPA, IRB has agreed to continue cooperating with the Department of Justice in other related investigations, to continue to implement a compliance and ethics program as set forth in the NPA, and to report to the department regarding the company’s remediation and implementation of the compliance measures as described in the NPA. Further, IRB has agreed to pay victim compensation of $5 million to shareholders who sold IRB stock on March 4, 2020.
The department reached this resolution with IRB based on a number of factors, including, among others, the nature and seriousness of the offense conduct that involved IRB’s former CFO, as well IRB’s cooperation and implementation of remedial measures. In addition, IRB and the department agreed that the total amount of losses to all shareholders who sold IRB stock on March 4, 2020, was significantly more than $5 million. However, despite agreeing that a larger amount otherwise would be appropriate based on the law and the facts, IRB made representations to the department that the Company had an inability to pay a criminal monetary penalty and to cover the full loss to shareholders. Based on those representations, the department, with the assistance of a forensic accounting expert, conducted an independent inability-to-pay analysis, which determined that the payment of more than $5 million was reasonably likely to threaten the continued viability of IRB. Considering the foregoing, and consistent with the Criminal Division’s policy on Evaluating a Business Organization’s Inability to Pay a Criminal Fine or Criminal Monetary Penalty, the department has determined that the payment of any criminal monetary penalty and victim compensation in an amount exceeding $5 million is reasonably likely to threaten the continued viability of IRB, which in turn may expose the company’s shareholders to a further risk of loss.
U.S. Legal Process: As a defendant charged in the United States, the case against Passos can be resolved in a variety of ways. Passos is entitled to plead not guilty, in which case the United States bears the burden of proving his guilt at trial beyond a reasonable doubt. Alternatively, Passos could plead guilty to one or more of the charges in the indictment. To the extent that Passos pleads guilty or is convicted at trial of one or more of the charges in the indictment, the government will request that the court order restitution, which is reimbursement to victims for certain financial losses incurred as a direct and proximate result of an offender’s crime.
To the extent that Passos is apprehended by U.S. authorities, the disposition of his case likely will not occur in the near future. Moreover, if Passos pleads guilty or is convicted at trial, he may not have the funds to fully compensate all his alleged victims, and the court will determine how any funds recovered would be distributed to the victims of his crimes. The government’s request that the court order restitution is not a guarantee that victims will receive any recovery. Moreover, although the criminal process is separate from any civil actions, any funds paid as part of court-ordered restitution in the criminal case would be subject to offset if victims were to recover losses from a civil suit, arbitration, or other settlement arising from this conduct.
Additionally, U.S. law permits a company to be held criminally liable for the illegal acts of its employees and agents under certain circumstances. Corporate criminal cases can be resolved in a variety of ways, including through an indictment and a trial, guilty plea, deferred prosecution agreement (“DPA”), and/or a non-prosecution agreement (“NPA”). If you believe you were harmed as a result of the conduct described above and would like to provide information to the Criminal Division, please use the contact details below.
Presumption of Innocence: It is important to keep in mind that an indictment contains allegations only, and that the defendant is presumed innocent until proven guilty and that presumption requires both the court and our office to take certain steps to ensure that justice is served.
Crime Victims’ Rights Act and Right to Retain Counsel: Because charges have been filed in this case in federal court, you also may be entitled to the following rights, according to the Crime Victims’ Rights Act, Title 18, United States Code, Section 3771: (1) The right to be reasonably protected from the accused; (2) The right to reasonable, accurate, and timely notice of any public court proceeding, or any parole proceeding, involving the crime or of any release or escape of the accused; (3) The right not to be excluded from any such public court proceeding, unless the court, after receiving clear and convincing evidence, determines that testimony by the victim would be materially altered if the victim heard other testimony at that proceeding; (4) The right to be reasonably heard at any public proceeding in the district court involving release, plea, sentencing, or any parole proceeding; (5) The reasonable right to confer with the attorney for the Government in the case; (6) The right to full and timely restitution as provided in law; (7) The right to proceedings free from unreasonable delay; (8) The right to be treated with fairness and with respect for the victim’s dignity and privacy; (9) The right to be informed in a timely manner of any plea bargain or deferred prosecution agreement; and (10) The right to be informed of the rights under this section and the services described in section 503(c) of the Victims’ Rights and Restitution Act of 1990 (42 U.S.C. § 10607(c)) and provided contact information for the Office of the Victims’ Rights Ombudsman of the Department of Justice. The Crime Victims’ Rights Act (18 U.S.C. § 3771) applies only to victims of the counts charged in federal court, and thus individuals may not be able to exercise all of these rights if the crime of which the individual is a victim was not charged.
Section 3771(c)(2) of this Act requires that we advise you that you have the right to retain counsel. Although the statute specifically sets forth your right to seek advice of an attorney with regard to your rights under the statute, there is no requirement that you retain counsel. The Government may not recommend any specific counsel, nor can the Government (or the Court) pay for counsel to represent you. Government attorneys represent the United States.
If you elect to obtain counsel to represent your interests, please have your attorney notify this office in writing at: U.S. Department of Justice, Criminal Division, Fraud Section, 10th & Constitution Avenue, NW, Bond Building, 4th Floor, Washington, DC 20530, Attention: Victim Witness Unit; fax: (202) 514-3708; or email: [email protected]. If you elect not to retain counsel to represent your interests, you do not need to do anything.
Plea Agreements: Please be aware that many criminal cases are resolved by plea agreement between the Department of Justice and the defendant. You should also know that it is not unusual for a defendant to seek to negotiate a plea agreement shortly before trial is scheduled to begin. Plea agreements can be made at any time and as late as the morning of trial, leaving little or no opportunity to provide notice to you of the date and time of the plea hearing. If the court schedules a plea hearing in this case, we will use our best efforts to notify you of available information as soon as practicable. If you want to inform the prosecutor of your views regarding potential plea agreements or other agreements in connection with the conduct described in the Passos indictment, or any other aspect of the case, please call the Victim Assistance Line toll-free at (888) 549-3945 or email us at [email protected], and we will put you in touch with the prosecutor.
https://www.justice.gov/criminal-vns/united-states-v-fernando-passos
