October 3, 2016 / 1:32 PM / a year ago

UPDATE 1-Braskem enters talks with U.S. officials in graft case

(Adds details of case, context)

By Brad Haynes

SAO PAULO, Oct 3 (Reuters) - Brazil’s Braskem SA, Latin America’s largest petrochemical producer, said on Monday it had entered talks with the U.S. Department of Justice and the Securities and Exchange Commission regarding an internal graft probe started in 2015.

Braskem said in a securities filing that it aimed to reach a formal accord that may result in “material financial obligations” and other possible sanctions. The company said it would also start a parallel process with Brazilian authorities.

The negotiations bring Braskem closer to a reckoning in the vast corruption scandal engulfing its two main shareholders, state-run oil company Petroleo Brasileiro SA and engineering conglomerate Odebrecht SA.

Braskem shares rose 3 percent in early Sao Paulo trading, the biggest gain on the benchmark Bovespa stock index, as the company neared closure on the corruption probe.

Brazilian prosecutors have accused Odebrecht of paying bribes for contracts including a deal for Petrobras to supply naphtha to Braskem at favorable rates that eventually caused 6 billion reais ($1.9 billion) of losses.

Braskem’s former chief executive, Carlos Fadigas, last year dismissed allegations of an unfair supply contract and in December signed a new five-year naphtha deal with Petrobras.

Shareholders in a class action suit in New York accused Fadigas and other executives of making “materially false and misleading statements regarding the company’s business, operational and compliance policies.”

Fadigas stepped aside as CEO in May, handing the reins to Fernando Musa, who had run the company’s business in the United States and Europe since 2012.

Braskem said in an August earnings filing that it would enter talks with U.S. officials to clarify accusations that had come up in investigations of third parties.

In Monday’s filing, Braskem did not comment on alleged wrongdoing and said it could not predict the duration or result of the ongoing talks.

$1 = 3.24 reais Reporting by Brad Haynes; Additional reporting by Paula Laier; Editing by Daniel Flynn and Paul Simao

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