Brazilian prosecutors said on Tuesday they had charged Forjas Taurus SA, Latin America's largest gun maker, in May for dealing with a known Yemeni arms trafficker in violation of international sanctions, prompting the company's shares to plunge.
Taurus confirmed on Monday a Reuters report that two former executives had been charged over a deal in 2013 that allegedly sent arms to Yemen's civil war, but the company said it was only a concerned party in the case.
"Although the company and its management are not parties in the proceedings, as soon as the company learned of the case, which could harm its reputation, it requested and was granted the status of concerned party to clarify the facts and help the investigation," Taurus said in a late Monday securities filing.
The company declined to comment immediately on the statement by prosecutors on Tuesday.
Taurus shares plunged 8 percent on Tuesday, their biggest drop in 16 months.
The case against Taurus, currently sealed by a judge in the southern city of Porto Alegre, near Taurus headquarters, according to prosecutors, underscores concerns about fallout for the firm, which benefits from its designation as a strategic defense company by the Brazilian government.
Taurus is a major supplier of firearms to Brazil's police and military and one of the top five makers of handguns in the US market, where it sells nearly three-quarters of its output.