Portugal Telecom’s former board members Zeinal Bava, Henrique Granadeiro, Luís Pacheco de Melo and Amílcar Morais Pires face fines of up to €5 million for lying to the Stock Market Commission (CMVM) and misleading investors.
The CMVM, led by Carlos Tavares, has been keen to establish who was been responsible since 2012 for dishing out massive loans to the Grupo Espírito Santo (GES) subsidiary Rioforte.
GES was PT’s biggest shareholder with over 10% of the shares and a seat on the PT board taken up by Amílcar Morais Pires.
The four directors are now official suspects in a case of stock market manipulation as substantial and risky loans to Rioforte, switched later to Espírito Santo International, did not appear in PT’s accounts for 2012, 2013 and part of 2014.
The PT audit committee is accused of failing in its supervisory role and João Mello Franco, José Xavier de Bastos and Mário Matos Gomes are named as suspects.
At issue are the loans made to companies controlled by Ricardo Salgado without the approval of the full PT management and the provision of information to the market on PT’s annual reports and accounts that "was not true, was not complete, was not clear and was not lawful."
The fines that the CMVM is able to impose for these serious offences in violation of the Securities Code range from €25,000 to €5 million for each person.
The defendants are accused of acting knowingly and voluntarily, or with intent and the audit committee members are accused of 'failing to exert due care' - perhaps the understatement of the year so far.
Loans to Espírito Santo International started with €250 million in 2010 'authorised by Zeinal Bava' according to the CMVM even though Bava has been at pains to deny any knowledge of any loans to any GES company, ever.
This initial loan increased to €750 million in May 2013 and to €900 million in February 2014 when Salgado cunningly switched the name of the creditor from Espírito Santo International to the soon-to-be-bankrupt Rioforte.
The critical switch was authorised after a ‘good lunch’ was had by Henrique Granadeiro and Luís Pacheco de Melo, with Amílcar Morais Pires and Ricardo Salgado.
Whether Rioforte entered insolvency proceedings in 2015, PT’s loan stood at €900 million. It has never been repaid.
The CMVM said that investment decisions were "informally taken," and were communicated to the financial department by Zeinal Bava or by Pacheco de Melo despite not having being approved by the governing bodies and the PT management.
This broke the rules especially as these actions were investments with ‘related parties’ as Grupo Espírito Santo was a PT shareholder.
Zeinal Bava has long denied any knowledge of the loans to GES subsidiaries yet later was found to have been in receipt of €8.5 million from Salgado paid into an offshore account.
Bava said this money was for a PT directors’s share buying scheme and the total sum has been returned but Ricardo Salgado says the money was for Bava’s personal benefit in a Golden Handcuffs agreement for Bava and his team.
All those accused by the Stock Market Regulator now are entitled to present their defence.
From left to right - Zeinal Bava, Henrique Granadeiro, Luís Pacheco de Melo and Amílcar Morais Pires have been accused by the Stock Market Regulator of giving false information to the market about the Portugal Telecom accounts and of favouring PT's major shareholder, Grupo Espírito Santo when in 2014 the board approved a loan of €897 million for GES subsidiary Rioforte.
