Leaders of Brazil Mining Giant Vale Step Down as Criminal Inquiry Widens

Leaders of Brazil Mining Giant Vale Step Down as Criminal Inquiry Widens

RIO DE JANEIRO — The top executives at Vale, Brazil’s largest mining company, agreed over the weekend to step aside temporarily at the request of prosecutors who are building a case of criminal negligence following a dam collapse at a Vale mining complex that left hundreds dead in January.

In a court document issued on Friday, federal and state prosecutors urged Vale to suspend its chief executive, Fábio Schvartsman, and eight other top executives, while the probe into the Jan. 23 disaster in the town of Brumadinho in Minas Gerais state continues.

The legal filing, which contends that officials at Vale ignored warning signs and had inadequate safety protocols, made the unusual request that the company bar the top officials from company facilities and force them to cease all business operations.

Vale announced late Saturday night that its board of directors had agreed to heed the suggestion, saying Mr. Schvartsman and the other top officials would step down temporarily.

Vale said in a statement it intends to build a “transparent and productive relationship with the Brazilian authorities in order to clarify the facts, to properly remediate the damages and to maintain the company’s integrity.”

The move was the latest burst of turbulence at Vale, which has been in crisis mode since a torrent of mud and sludge ripped through its compound in Brumadinho, burying scores of its employees and local residents and sending ripples of toxic waste downstream for miles.

At least 186 people were killed and the 122 who remain missing are widely presumed to have died.

It was not clear whether the temporary departures represented the first step toward a complete overhaul of the leadership of a company that is a pillar of Brazil’s economy.

Vale had already come under scrutiny after a dam it co-owned burst in November 2015, killing 19 people. Both disasters occurred in Minas Gerais state.

“I’m absolutely convinced that my personal conduct and that of the members of our leadership, who are now being asked to step down, was absolutely adequate, correct and, chiefly, in keeping with our nonnegotiable commitment to security in the company’s operations.”

In their filing on Friday, prosecutors charged that Vale’s corporate conduct was “diametrically opposed” to its stated commitment to uphold high social and environmental standards.

The filing does not assign blame for specific lapses to individual executives, but it made clear that investigators worry that keeping them at the helm of the company could stymie a proper reckoning.

Prosecutors also argued in the legal document that company executives continue “to act damagingly” to society, by ignoring risks at other Vale dams.

In the filing, they questioned Mr. Schvartsman’s appointment of Gerd Poppinga to oversee company interactions with the government in the wake of the January disaster, noting that Mr. Poppinga faces charges related to the 2015 dam burst.

Vale’s board of directors appointed Eduardo Bartolomeo, a veteran company executive, as interim chief executive officer over the weekend.

The temporary departures followed the arrest of eight company employees who were taken into custody last month as investigators executed search warrants at several facilities. They are being held on suspicion of first degree murder.

Prosecutors have said Vale’s relationship with contractors hired to monitor safety standards created a conflict of interest because the outside firms stood to gain by certifying that mining sites were operating safely.

Last September, for instance, Vale cut ties with a safety auditor after it raised flags about the dam. It subsequently got a clean bill of health from a different firm, according to prosecutors.

Prosecutors added that the evidence they have reviewed suggests that as a matter of policy Vale misled government officials about the risks of its dams. This was done, they wrote, to “guarantee economic activities at the company without being exposed to questions” by regulatory and law enforcement officials.

Analysts credit Mr. Schvartsman for ably running the company during Brazil’s recent recession, which was aggravated by declining demand for commodities.

“He was putting that company back on track,” said Paul Gait, a mining analyst with Bernstein Investment Research and Management. “There were question marks about whether the company would even survive the commodity crisis, but he brought it back from the brink and, some would argue, saved the company.”

Mr. Gait said industry analysts had broadly assumed that the company’s chief executive would hold on to his job after he did not resign in the immediate aftermath of the diaster.

“He seemed to have weathered the storm, and the last thing the board or Vale needed was more disruption to the leadership of the firm,” Mr. Gait said.

Moody’s Investor Service last week downgraded its outlook for Vale, citing the money the company will need to spend in response to the disasters and the uncertainty created by the ongoing criminal investigation.

A main concern for Vale is “the magnitude of the potential fines, penalties and compensation the company will have to pay out,” said Carlos De Alba, a basic materials analyst with Morgan Stanley.

Mr. De Alba added that the mining industry has become increasingly attentive to safety issues since the dam burst.

“Companies have been much more forthcoming about their own situation; they want to be more transparent,” he said. “This is going to have a dramatic impact in the industry in terms of how you build and disclose information about tailing dams. Everyone is looking at any potential risk in their own companies.”

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