(Adds Ternium dropping negotiations on ThyssenKrupp plant, CSA
on lawsuit notification)
By Rodrigo Viga Gaier and Guillermo Parra-Bernal
RIO DE JANEIRO Dec 20 Rio de Janeiro state
prosecutors filed a lawsuit against former state Governor Sérgio
Cabral, two of his former secretaries and ThyssenKrupp AG
steelmaking unit Companhia Siderúrgica do Atlântico SA
for administrative impropriety over the granting of an
The lawsuit worsens the prospects for selling the
money-losing Brazilian plant, as Germany's ThyssenKrupp has been
trying to do for four years.
Cabral, currently in jail pending trial on unrelated
corruption charges, and his former secretaries may
be fined and barred from public office for eight years if they
lose the suit, according to a statement from prosecutors.
CSA declined to comment saying it was not notified of this
new lawsuit and lawyers for Cabral did not immediately comment.
The CSA plant is the largest single foreign investment ever
made in Brazil, costing about $10 billion.
Ternium SA, which had resumed negotiations to acquire
the plant in October, gave up on the deal recently
considering the regulatory and tax risks involved, a source with
direct knowledge of the matter told Reuters this week.
Ternium declined to comment and ThyssenKrupp did not
immediately respond to requests for comment.
State prosecutors say CSA was granted a temporary
environmental license to begin operations in 2010, although the
state's environmental body opposed it. At the same time, the
steelmaker received tax breaks from the state.
The steelmaker may be barred from winning new public
contracts in Brazil until it has paid for environmental damage
if it loses the suit. CSA could also be barred for five years
from receiving tax breaks in the state.
(Reporting by Rodrigo Viga Gaier; Writing by Tatiana Bautzer;
Editing by Diane Craft and Alan Crosby)