NEW YORK (TheStreet) -- Shares of Gerdau SA (GGB) - Get Gerdau S.A. Sponsored ADR Pfd Report stock are down 1.16% to $1.70 late Tuesday afternoon after Brazil's police accused the country's largest steelmaker and its CEO of corruption-related offenses, the Wall Street Journal reported.
Filed Friday in federal court, police are seeking charges against Chief Executive André Gerdau Johannpeter and 18 other company executives, tax authority officials and lawyers for evading 1.5 billion reais or $428.6 million in taxes owed by the firm. They are being sought on charges of bribery, money laundering and influence peddling, a police spokesman told the Journal yesterday.
Last night, Gerdau wrote in an email to the Wall Street Journal that the firm has not yet seen the report containing the accusations but assured its executives never "promised, offered or gave improper benefits to public functionaries so that cases open in CARF would be illegally judged in their favor."
The charges against Gerdau come as part of the Brazilian police's Operation Zealots investigation. The probe was launched in March 2015 and has led police to pursue allegations that Gerdau executives bribed tax officials to win favorable judgments from a special tax court known as CARF, the Journal said.
In February, the firm's offices were raided and Johannpeter was questioned by police for two hours, according to the Wall Street Journal.
Gerdau's shares have dropped as much as 6.7% after the corruption allegations leaked. The average volume for the Rio De Janeiro-based company has been 11.58 million shares per day while this afternoon Gerdau had 17.30 million shares on heavy trading. Gerdau has a market cap of $3.4 billion and is part of the basic materials sector, and metals and mining industry.
Separately, TheStreet Ratings rated Gerdau SA as a "sell" with a score of D.
TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon.
Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
This is driven by several weaknesses, which TheStreet Ratings believes should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks are covered.
The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, disappointing return on equity, poor profit margins, generally disappointing historical performance in the stock itself and feeble growth in its earnings per share.
You can view the full analysis from the report here: GGB