The long awaited PwC audit into the financing of Grupo Espírito Santo companies by Portugal Telecom suggests that Banco Espírito Santo, specifically Ricardo Salgado, concealed vital financial information from the Portugal Telecom board as to the true financial situation at Rioforte.
PwC reports that on 27 November 2014, after Rioforte already had failed, the Portugal Telecom board were given a financial analysis where it was reported that the "integration of Espírito Santo Financial Group and Rio Forte had had a negative impact on the value between €1.6 and €1.9 billion."
There are indications that this impact was already clear to Banco Espírito Santo when it borrowed moeny from Portugal Telecom. Had the PT board known the true picture, it would have been unlikely to have agreed the loan.
PwC suggests that Banco Espírito Santo knew full well the financial situation at Rioforte, but omitted to let Portugal Telecom know this before borrowing its money.
Rioforte famously failed to repay PT nearly €900 million. It then applied for creditor protection in Luxembourg and later was declared insolvent leaving PT at a huge disadvantage in its merger talks with Brazilian telecoms company Oi. PT's shares are currently trading at 5% of the value they were at a year ago.
In February 2014 Portugal Telecom lent Rioforte the money just a few days after a meeting in which Ricardo Salgado, then the head of Banco Espírito Santo, presented Rioforte to the chief financial officer of Portugal Telecom, Luís Pacheco de Melo.
It was explained by Salgado that the Portugal Telecom Group should invest in loan notes issued by Rioforte; safe as houses, a sure fire thing, trust me I'm a banker, its only €897 million...
It was in November 2014 that the Portugal Telecom board learned that the company 'restructuring' of the various Grupo Espírito Santo subsidiaries had led to a negative impact of "between €1.6 and €1.9 billion" in Rioforte leaving it broke, bust and insolvent in the extreme and certainly unable to repay the Portugal Telecom debt which may habve been the plan all along.
This puts Ricardo Salgado in a tricky situation as Espírito Santo also was a major shareholder in PT, it largests in fact, and the claims of undue influence on its board members as well as plain lying by ommission of facts now are not far from the charge sheet.
For the PwC report in Portuguese see:
