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Jan 21, 2020

Ex-Vale CEO charged with homicide for Brazil dam disaster

Fabio Schvartsman, chief executive officer of Vale SA

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Vale SA’s former chief executive officer was charged with homicide for the massive dam collapse that killed more than 250 people in Brazil last January.

Fabio Schvartsman is the highest profile executive facing criminal charges for Brazil’s worst environmental disaster. Schvartsman, 65, led the company since May 2017 before taking a leave in March after federal prosecutors recommended his immediate exit.

The Brumadinho disaster sent a deluge of mud down a mountainside, burying people nearby. The incident spurred Brazil’s government to review mining operations, especially the dams that are responsible for mining waste held in huge ponds.

Charging a CEO with homicide for corporate actions is relatively rare, but not unheard of -- the head of Union Carbide Corp. was charged with manslaughter by Indian authorities for a 1984 gas leak that killed thousands in Bhopal (he was arrested but never faced trial after the U.S. refused to extradite him).

The CEO of ThysssenKrupp AG’s Italian unit was sentenced to prison after a fire at a steel plant there killed seven workers in 2007; and the CEO of a South Korean ferry company was charged with homicide through occupational negligence after hundreds died when his vessel sank in 2014.

Vale’s American depositary receipts tumbled 1.8 per cent to US$13.39 at 1:13 p.m. in New York, poised for the biggest decline this year. In Sao Paulo trading, shares were down 1.8 per cent.

In October, Vale said it has posted US$6.3 billion in expenses related to the rupture, which severely cut production and sent iron-ore prices on a rollercoaster. The company lost about a fourth of its market value in the immediate aftermath, but it has since largely recovered in Sao Paulo trading.

A report released in December from a panel of experts commissioned by Vale blamed faulty design for the dam’s collapse. The facility was too steep and had insufficient drainage, resulting in high water levels that put stress on the structure, according to the report.

It was not the first collapse of a Brazilian tailings dam. On Nov. 5, 2015, a tailings dam operated by a venture co-owned by Vale burst near a Mariana municipality, killing 19. Prosecutors filed charges against 21 people in 2016 as a result.

In September, Brazilian police indicted Vale, the testing service TUV SUD and 13 employees of the two companies for producing misleading documents about the safety of the dam that buried the community of Brumadinho, in Minas Gerais state.