On June 9, with his 150-year-old Portuguese corporate dynasty close to collapse, patriarch Ricardo Espirito Santo Salgado made a desperate attempt to save it.
Salgado signed two letters to Venezuela’s state oil company, which had bought $365 million in bonds from his family’s holding company. The holding company was in financial trouble. But the letters, according to copies seen by Reuters, assured the Venezuelans that their investment was safe.
The "cartas-conforto" – letters of comfort – were written on the letterhead of Banco Espirito Santo, a large lender controlled by the family. They were co-signed by Salgado, who was both the bank’s chief executive and head of the family holding company.
"Banco Espirito Santo guarantees ... it will provide the necessary funds to allow reimbursement at maturity,” said the letters.
There were problems, though: By promising that the bank stood behind the holding company’s debt, the letters ignored a directive from Portugal’s central bank that Salgado stop mixing the lender’s affairs with the family business.
The guarantees were also not recorded in the bank’s accounts at the time, which is required by Portuguese law.
The following week, after intense pressure from regulators, Salgado resigned. Within a month, the holding company, Espirito Santo International, filed for bankruptcy, crumbling under 6.4 billion euros ($8.4 billion) in debt.
In August, Banco Espirito Santo was rescued by the Portuguese state, after reporting 3.6 billion euros in losses.
The two letters, whose existence was made public last month but whose details are revealed here for the first time, are a key part of an investigation into the spectacular fall of one of Europe’s most prominent family businesses. Portuguese regulators and prosecutors are examining them along with the bank’s accounts and other evidence to determine whether there was unlawful activity behind the fall of the Espirito Santo empire.
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The read the rest of the excellent in-depth article from Sergio Goncalves, Laura Noonan and Andrei Khalip at Reuters, click HERE