Former PT directors and Deloitte sued over €897 million Rioforte loan

Pharol, formerly Portuguese Telecom, today lodged a lawsuit against its own former auditors Deloitte which was involved in the disastrous PT investments in Rioforte, a property company within the Espírito Santo Group.

Pharol does not stop there though, as it also is suing former PT directors Henrique Granadeiro and Luís Pacheco de Melo for agreeing to lend Rioforte €897 million of PT’s cash, money that was never returned as Rioforte went under in the Grupo Espírito Santo meltdown.

Pharol informed the market regulator CMVM that it formally has lodged a petition at the Judicial Court of the District of Lisbon for damages against Deloitte due to the failed investments in Rioforte.

Deloitte, as PT’s former auditor, is accused of “violation of contractual duties due to the losses made on investments in debt instruments issued by companies within the Espírito Santo Group.”

This action against the auditor is for "compensation equal to the difference between €897 million and any amount Pharol might receive under the Rioforte insolvency proceedings, plus interest.”

Pharol’s current board is after the old guard as well as today’s statement says the company "blames other elected directors in the 2012/2014 period and third parties” who it sees as responsible for the financial damage resulting from investments in Rioforte and in other debt issued by members of the Espírito Santo Group (GES).

On October 2, 2015 Pharol announced that it was suing former PT directors Henrique Granadeiro, Luís Pacheco de Melo and Amílcar Pires over the affair.

Henrique Granadeiro and Luís Pacheco de Melo already had left the company, with Granadeiro's leaving speech notable as the most self-serving, arrogant and whining farewell in the history of the company.  

Amílcar Morais Pires, also being sued, was the chief financial officer of Banco Espirito Santo, and also was a board member of PT.

Pires was a BES placement on the PT board as the bank was PT’s largest single shareholder. He was therefore involved in PT lending money to Rioforte and clearly was uncertain as to the meaning of the phrase “conflict of interests.”

PT's former Chief Executive, Zeinal Bava, has not escaped and also is cited in the court submission for actions leading to what are described as illegitimate loans to GES companies and for failing to fulfilling what was expected to comply with internal audit procedures which he controlled directly.

Pharol says that Bava "never ensured that such internal control systems were in place that would prevent investments that violated the statutes, regulations and policies of the company."

The court submission adds that "it is well understood that he did not, nor intend to reveal, financial reporting documents of such investments that he well knew were unlawful."

Bava moved from PT to telecoms company 'Oi' in Brazil until rather generously paid off of €5.4 million paid monthly €5.4 million plus a three year ban from working in telecoms.

Bava will get 36 monthly installments of €150,000 but has made an estimated €50 million while overseeing PT's collapse in shareholder value. Post-Bava, Pharol managed to lose an additional 68% in value in 2015 as the repercussions of the Rioforte loan continue to affect the company. 

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