Caixa Geral de Depósitos, BCP and Novo Banco have decided that Joe Berardo is unlikely to repay his massive bank borrowings and have started legal proceedings to seize 75% of the Berardo Foundation’s collection of modern art which was pledged as collateral.
The court will have to decide whether the Foundation is an entirely separate legal entity, or whether is it so inexorably linked to the well-known businessman, that the art collection can be auctioned off in settlement of Berardo’s debts.
The modern art collection actually is owned by the 'Fundação de Arte Moderna e Contemporânea - Colecção Berardo,' is housed in Lisbon and most of the works are on public display at the purpose built Berardo Collection Museum in Lisbon.
Under the stipulation that: “Every investor has the obligation to do good in his community” the Berardo Foundation was set up as a private charity working in education, health and culture.
A court now needs to establish whether or not the art is owned by the man, or by the Berardo Foundation.
In parallel with the planned seizure of art, the banks are said to be 'keen to reach an understanding' that allows them to minimise their losses by staying out of a prolonged court battle.
The museum was set up as a private-public partnership and was opened in late 2016 at a ceremony attended by the Minister of Culture, Isabel Pires de Lima. Earlier, Joe Berardo was lent €500 million by Caixa Geral de Depósitos, BCP and Novo Banco so he could purchase a 7% stake in BCP in 2007.
However, Berardo's loans far exceed the €500 million that the banks assume is underpinned by the foundation’s art collection.
The State bank, Caixa Geral, lent Joe Barardo €400 million, BCP lent another €400 million, BES (now Novo Banco) advanced €200 million and Santander Totta lent €100 million but the collateral is unevenly secured with 40% pledged to Caixa Geral, 40% to BCP and 20% to Novo Banco leaving Santander Totta out in the cold and facing a 100% loss on its loan.
The majority of the €1.1 billion was used by Berardo for ‘stock exchange operations’ but when share values collapsed in the 2008 financial crisis, his losses were massive.
Berardo had offered collateral to the three banks and 75% of the artwork held by the Berardo Foundation was seen by the banks as sufficient security despite Christie's 2007 valuation of the collection being €316 million in 2007, rising to around €400 million today - and despite the art technically being owned by a charitable foundation, rather than the personal property of the businessman.
If the banks end up with the art collection, what will they do with it? Leave it on permanent display, ask the taxpayer to buy the collection or sell pieces off to pay off Berardo's loans?
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Who is Joe Berardo?
The Berardo Collection website waxes lyrical about 'The Man Behind the Collection':
"The multifaceted personality of José Manuel Rodrigues Berardo is inevitably dazzling. This man with business interests all over the world, a pioneer in a number of sectors, an art collector and philanthropist, came into this world on 4 July 1944 in conservative Madeira. He was born in Santa Luzia, Funchal, the youngest of seven children and the second to be given the name Berardo after the family lost all its savings when Banco Henrique Figueira failed in 1931. By 1939, the Gomes family was already back on its feet after this financial setback and moved to a new home in the parish of Santa Luzia, where Jorge and José were born. In a real break with the past they were given the surname Berardo, one of the family names that had never been used before.
"He was the son of Manuel Berardo Gomes, a respected, highly principled man who could not read or write but was able to do sums in Roman numerals at breathtaking speed, and Ana Rodrigues Gomes, a deeply religious housewife from Monte. José Manuel Berardo feels that his life is a special gift from god, as his mother was 46 when he was born.
To read the remaining eulogy, click on this link:
