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Freeport scandal - 'close the shopping centre and return the land to the people'

freeport2Freeport hit the headlines some years back when it was involved in a bribery scandal around former environment minister José Sócrates and the building of the Alchochete shopping mall on environmentally-protected land.

Allegations were made, accusations thrown, and it all ended up in court. It's now on public record that some people accused the then environment minister, José Sócrates, of being corrupt.

Since then the mainstream Portuguese media largely has ignored this topic, which is strange, because Freeport is a perfect microcosm of what has been happening in not only Portugal, but in most countries across the world; large multinationals and private equity firms using political and financial leverage to persuade governments to grant access to land and other national resources. Result, the land (on which the Alcochete mall is built) is now owned by a private corporation when it used to belong to the Portuguese people.

Freeport was subsequently taken over by the Washington-based private equity firm The Carlyle Group (Carlyle) which is run by some of the greediest, most immoral people on the planet.

During the presidency of George W. Bush (2002-2009), there were many allegations that Bush literally was running the US's foreign policy so that his father (former president of the USA George H, W. Bush) and his buddies (James Baker III, Dick Cheney, Donald Rumsfeld and too many others to mention) could benefit financially.

Both Bush Snr. and James Baker III were heavily involved with Carlyle which was significantly “investing” in companies that produce armaments, and had some very deep links to the Pentagon. Armies need armaments (and other necessary equipment), especially when they go to war (Afghanistan, Iraq?) It does not take a Stephen Hawking to join these dots together and understand why Carlyle was accused of using political connections to further its own financial interests.

Other people who have been associated (and still may be) with Carlyle have been the former prime minister of the UK John Major and convicted inside-trader, noted ‘philanthropist’ and self-appointed conscience of the world, George Soros. Soros' ‘conscience’ happily allowed him to steal billions from the Russian people during the Boris Yeltsin government in the 1990s.

What a philanthropist!

Carlyle's links to the Pentagon can be traced as one of its most important company officers, Frank Carlucci, was (and remains) good friends with former US defence secretary Donald Rumsfeld. This description in a book about Carlyle had this to say about Rumsfeld – ‘A former college roommate and wrestling teammate of Frank Carlucci, Rumsfeld and Carlucci are never far apart. The two followed each other through  the executive ranks of government, worked for Sears Roebuck together, and remain very close friends to this day.’ (written in 2003.)

Some would call this nepotism, especially when Carlyle got juicy defence contracts when Rumsfeld was at the centre of the Bush administration which took America (and Britain) into the wars in Iraq and Afghanistan.

But all this is ancient history. The last book I saw on Carlyle was written in 2003, ‘The Iron Triangle: Inside the Secret World of the Carlyle Group’ by Dan Briody.

Since then things have changed quite bit. Bush has been replaced by Obama in the White House, other people have taken over key positions in the government, and it's unclear if Carlyle has the same access to the same political positions as it did under the Bush administration. Though one shouldn't assume it is any worse.

David Rubenstein, one of the company's three CEOs, is a member of the Council of Foreign Relations. This says it all: Carlyle still has political clout.

The above is merely to explain what kind of people run Carlyle, the company which now owns and controls Freeport.

In the last few years Carlyle has expanded into the European retail and property market under its CEREP (Carlyle European Retail Estate Partners) companies, principally CEREP Investment I Sarl which is registered in Luxembourg. 

Freeport's main shareholder is CEREP UK Investment D GP Ltd, which is owned by CEREP Investment I Sarl – which is owned by Carlyle! Do you see how it all fits?  Thus Freeport is not simply run as a business; it's run to make profits for Carlyle's various investment funds and shareholders.

Since 2011 there have been some significant changes in the way Freeport has been run. Interestingly, this has been when Freeport's profits (though even that is questionable) turned into losses.

Then managing director Robert Hodges was all up-beat about Freeport's impressive economic performances (in his opinion) during trying times for the business community, while also revealing €94,000,000 in further funding. He also revealed that another company Freeport Retail Limited was being set up to ‘manage’ Freeport and some of the other CEREP-controlled companies.  Quite why another company was needed to ‘manage’ Freeport was not really explained. What is the purpose of CEREP Investment I Sarl if it is not to ‘manage’ Freeport?

This was roughly around the time I became interested in the company, in particular it's relationship with José Sócrates during the bribery scandal which was covered on one of Wikipedia's pages. Somewhat naively, I emailed Freeport's CEO, Iestyn Roberts, and asked him if he could put me in contact with Alan Perkins and Charles Smith – two former Freeport associates mentioned in the Wikipedia articles and also in several Portuguese newspapers during the trial.

Roberts' reaction was to label Charles Smith and Alan Perkins as unscrupulous and incompetent (his own words), that  he would in no way assist me in contacting them, and that Freeport's lawyers would  be looking closely at any articles (or books) that they would consider to be a  defamation of Freeport' - in other words - a veiled threat.

The last statement resulted in several angry emails between myself and Roberts, but I also managed to download several documents on the company, in particular the accounts, the annual return and some of the mortgage statements. Being a trained accountant I started to follow the breadcrumbs (or as accountants say, the audit trail) and noticed some alarming things in the company's accounts, in particular those of 2012, the last ones published.

Not only did the figures in the  notes to the accounts not agree to those in the balance sheet (they should), there was  also the question of Freeport being owed approximately £14.9m by its shareholder (CEREP UK Investment D GP Ltd), a company with no assets apart from an  insignificant £1,000 or so in the bank.

Subsequently, I wrote several articles in the Algarve Daily News, but also complained to the Institute of Chartered Accountants of England and Wales (ICAEW) as the accountants (Baker Tilly) who produced the accounts are members of this supposedly august organisation. The ICAEW considered the allegations serious enough to investigate the matter. Though, as it has no real serious teeth, nothing really was achieved. 

But possibly due to the articles in the Algarve Daily News and my complaints to the ICAEW, Freeport's company officers have started to act in a rather suspicious manner.


When I started writing about Freeport it had four directors (Iestyn Roberts, Robert Hodges, Eric Sasson and Hafiz Mohamed Ali) and one company secretary (Ian J. Brownstein). They have all now resigned and been replaced by an American, Matthew Lo Russo.

Hafiz Mohamed Ali was subsequently reappointed as director on the 18 September 2013, but resigned on the 26 February, 2014. So that leaves just one company officer from the original five. Matthew Lo Russo seems to be the main man representing Carlyle (see his profile on the company website).

However, the more worrying fact is that Freeport not only has failed to publish accounts this year (for 2013), it has also failed to produce accounts for CEREP UK Investment D GP Ltd. As Freeport is an unlimited company it does not actually have to publish accounts, though questions should be asked as to why they did so in previous years (I have copies of the 2011 and 2012 accounts).

However, CEREP UK Investment D GP Ltd does have to publish accounts (and other documents). At the time of writing the accounts were overdue from the 31 March, while the annual return, being due on the 2 May, was now also outstanding. I have complained to Companies House, but it is close to toothless.

Another interesting fact is that Matthew Lo Russo also was recently appointed as a director of Freeport Retail  Limited, clearly to replace Hodges and Sasson, who were representing CEREP  Investment I Sarl's, in other words Carlyle’s, interest in the company. Lo Russo (along with Hafiz Mohamed Ali) is also a director of CEREP UK Investment D GP Ltd. So essentially it's his job to make sure that the accounts are filed on time (not over a month later) as well as other documents like annual returns.

According to the last accounts I saw (2012), the only amounts on the balance sheet was the £14.9m loan from Freeport and a bank balance of £1,018.  How long does it take to produce accounts with only two entries on the balance sheet (and not even a profit and loss statement)? And while CEREP UK Investment  D GP Ltd does have to publish Freeport's profits (or losses in the last two  accounts), given that the both companies has the same year-end date, why the  extended wait?

What are these people doing?

Whatever amount Matthew Lo Russo is paid it's clearly too much as he seems completely incapable of filing a simple set of accounts (and other required documents) on time. Furthermore, we need to ask where the €94,000,000 mortgage (which Freeport acquired on the 20 September 2011) has gone to as it wasn't on the 2012 accounts.

With regards to Iestyn Roberts' comments about Charles Smith and Alan Perkins being unscrupulous and  incompetent, it seems these descriptions would equally apply to Freeport's company officers and its colluding accountants (Baker Tilly), in particular the  audit senior John Bennett who prepared both Freeport's and CEREP UK Investment D  GP Ltd's accounts.

The main concern is here is that Carlyle and the people they associate with, like most major multinationals, are taking the Portuguese (and the Greeks, Irish, Spanish and few others) for idiots. They clearly think that they don't have to abide by the same rules as everyone else and happily use all manner of artificial schemes to avoid paying taxes, and thus funding future projects.

A spokesperson for the Troika (European Commission, ECB and IMF) commented on Portugal's supposedly improving economic situation and the plan to exit the austerity programme this month. But, he added, there could be no complacency and many changes still had to be made for Portugal again to have a ‘competitive’ economy. He said: “This will require a decisive break with the past and a commitment to profound and lasting changes.”

I couldn't agree more. What better way to demonstrate a “decisive break with the past” than shutting down the needless Disneyland-style shopping centre (Alcochete) and kicking out Freeport and its corrupt Carlyle buddies.

Then the land should be given back to the Portuguese people.

Maybe we could also have politicians who want to serve the country, not its international money-masters (EC, ECB and the IMF). These would be “profound and lasting changes” most of the Portuguese people would agree with. 




See also the video of Charles Smith of Smith & Pedro discussing Socrates' involvement in cash payments:


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+1 #7 AJG 2014-05-12 10:02
["Nigel Platter"]

Also - In an established whistle blowing developed economy an accountant with doubts has the fundamental legal protection of either not signing off his employers accounts or doing so with a 'Caveat'.

There is a "Caveat"., Section 449 of the Companies Act 2006. The auditor's report states, "To the full extent permitted by the law, we do not accept or assume responsibility to anyone other than the company for our work, for this [auditor's] report, or for the opinions we have formed.

So why bother?
+1 #6 chiptheduck 2014-05-11 12:25
Quoting Nigel Platter "
Also - In an established whistle blowing developed economy an accountant with doubts has the fundamental legal protection of either not signing off his employers accounts or doing so with a 'Caveat'."

So the EU is not a developed economy. Remember accountant Marta Andersen who was sacked by the EU for whistle blowing about their finances? No legal proitection for her - and 17 years of unaudited accounts seems not to worry Brussels.
+4 #5 Nigel Platter 2014-05-11 11:25
What rarely gets mentioned in Portuguese corruption discussions is the public / civil servants involvement in 'making it happen'.

Arranging the Freeport transfers - firstly from its previous environmental protected status and secondly from the private to the public sector cannot have been done without the assistance of public servants.

If just one of them had enough back bone (and the reassurance that their job and prospects were safe) to 'go public and whistleblow' - the Troika could begin to relax more.

Hoping that the billions soon to be poured again into Portugal will be directed exactly where they are needed. Not siphoned off-shore or re-directed by the elite upper class.

Politicians are on the make everywhere ..... it is public servants not looking after the public's interests and feathering their own nests - that continue to fail Portugal - and more importantly ..... the EU.
+4 #4 Nigel Platter 2014-05-11 09:26
We must stay focussed on two main issues .... the transfer activity..

Missing in previous post was the first irregularity - how the environmentally sensitive land was originally deregulated and the arrangements for the selling on .... and obviously why was Pinocchio's family at all connected to this transaction ?

When finally Portugal gets a middle class (as the McCanns obviously are when originally publicising their missing child) - this new group hopefully will drive Financas to track the 'next of kin financial activity' of the decision making elite / upper class ??

Also - In an established whistle blowing developed economy an accountant with doubts has the fundamental legal protection of either not signing off his employers accounts or doing so with a 'Caveat'.

Which would mean ... These accounts are not believable as I have no idea where my boss got his numbers from'.

Has OTOC any awareness of this great step forward?
+5 #3 RCK 2014-05-10 18:43
Wow! What a great article Ed. Very interesting and informative. Anything anti American satisfies my general contempt for the warmongering, bullying American establishment. Good for you - but mind how you go
+4 #2 Nigel Platter 2014-05-10 17:38
the land (on which the Alcochete mall is built) is now owned by a private corporation when it used to belong to the Portuguese people......

It is good to get a handle on some of our posters - I write as a semi-retired University Business School Professor.

Surely the focus should be on 'Who' sold the Portuguese public assets to Carlyle (or whatever intermediary had it before them) - and what did they get in return for making the 'arrangement' ?

Being a public sector asset transaction surely this information will be in the public domain ?? So .... let us know !

Or is this incessant 'state asset horseplay' - as with Miro paintings, swap contracts, submarines and many other irregularities - the sort of thing the Troika rightfully continues to be alarmed about ?
+3 #1 chiptheduck 2014-05-10 15:21
Excellent and detailed article.

I'm not surprised that the Institute of Chartered Accountants in England & Wales (ICAEW) have failed to take action against Baker Tilly. The professional accountancy bodies are in the pockets of the large accounting firms.

When Ernst & Young (now EY, why indeed) missed £2 billion of liabilities from Equitable Life's balance sheet, causing more than 100,000 savers to have their pensions decimated, the ICAEW told me that action was to be directed against the relevant partners rather than the firm and that it would be taken by the profession's Joint Disciplinary Committee.

Despite 30 emails to them over 5 years I could not find out what, if anything, transpired as the investigation was being carried out in private. I was promised a copy of the final judgement - guess what? Still waiting.

So the big accounting firms and the "professional" bodies stink to high heaven too!

I write as retired Chartered Certified Accountant.

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