Shocked Portugal Telecom shareholders have clubbed together are to mount a class action to recover the money they have lost as the telecoms provider's share price halved.
The action specifically is against the board of directors from 2001 to date who all decided that running a telecoms company was not sufficiently exciting, so diversified into behaving like a bank, lending eye-watering sums to its largest shareholder, the Banco Espírito Santo Group.
The market regulator has confirmed that these massive loans have been part of PT’s treasury operations since 2001, in one year the exposure was over €1 billion with the amounts enetrred into the accounts as shareholdings, not loans.
The most recent loan of nearly €900 million, in the form of a Rioforte corporate bond plus interest due, was not able to be repaid by the insolvent BES offshoot thus triggering the collapse of the entire Espírito Santo empire, the arrest of its erstwhile Chief Executive Ricardo Salgado, the flight of many Espírito Santo companies to the shelter of the Luxenbourg courts, the division of BES into a good bank and a bad bank, the unwarranted injection of €3.5 billion into the bank by the Bank of Portugal and days later the refinancing of BES with a further €4.5 billion from an EU rescue fund that is underwritten by the Portuguese taxpayer.
It could have been worse as in 2005 the amount lent by PT to ‘friends and family’ at the BES Group was in excess of €1.2 billion.
The shareholder’s association said that “the various boards of directors of Portugal Telecom went far beyond their remit as the main business of the operator is not to be a bank, financing other businesses.”
The new association also is set on fouling up the merger between PT and Brazil’s Oi which is being voted on at the next PT shareholders’ meeting in early September. Expect a frank and open exchange of views.
Comments
Only the EU way of doing things.
For decades the Portuguese have maintained, with a giggle, that they have their way of doing things - differently to what the EU says how to do it.
Anyone northern european who has tried to start a business here - and thousands attempting to buy or convert property - will be well aware that Portugal falls well short of anything resembling 'assisting inward investment' - one of the primary intentions of EU membership.
PT's games are a classic example of the Portuguese EU giggle.
Ignoring for nearly 3 decades any genuine opening up to competition of the telecoms sector - only fragmenting its own service - so allowing it to amass these huge profits.
Then squirreling it away .... in BES !