The former leader at BES subsidiary Rioforte, João Rodrigues Pena, said today that he believed that the company was "unfortunately, doomed from the start," stating that the collapse was all down to poor management within Grupo Espírito Santo.
"Today I am convinced with the information that I have, which is to a large extent public due to the work of the commission of inquiry, that the collapse of Grupo Espírito Santo was due to poor management practices and its serious financial situation which went for years and which the events of September 2013 to August that year unfortunately led to the inevitable collapse," said Pena to the parliamentary commission that is looking into the management of Banco Espírito Santo and Grupo Espírito Santo.
Pena said he believed Rioforte was doomed from the start by being dragged into the bankruptcy of its shareholder Espírito Santo International and by being made part of a solution that could not exist.
"I believe I did everything that was in my power to stop this process, but did not succeed because the situation completely fell outside the scope of Rioforte, after the company suffered the consequences of decisions made at the shareholder level," Pena added.
The work of the parliamentary inquiry is "to look into the practices of the previous management of Banco Espírito Santo, the role of the external auditors, and the relationship between BES and the set of member institutions at Grupo Espírito Santo.”
The Judicial Police spent much of today searching PT’s Lisbon offices as part of ongoing investigations into the Rioforte case of "suspected economic participation in serious fraud."
The telecoms company is led by João Mello Franco who today said he is calm and is willing to work with the authorities, not that he has much choice.
The prosecution already has authorised a search of the PT headquarters by the Judicial Police, and investigators from the stock market authority (CMVM) and the Tax Authority.
The Attorney General’s office said today that "This investigation concerns those under suspicion of participating in aggravated fraud and in investments made by the company."
At issue of course is the loan of €897 million by PT to Rioforte at a time when Rioforte’s parent, Grupo Espírito Santo was PT’s largest shareholder.
The searches were made following complaints by PT shareholders which has led to a wide investigation.
The prosecution says it cannot divulge any information at the moment as the investigation is ongoing under the Central Department of Investigation and Penal Action (DCIAP) but the press is being fed enough to keep the story live.
The €897 million lent to Rioforte by PT was never repaid and the failure by Grupo Espírito Santo to pay back the Rioforte loan led to a damaging change in the terms of the merger between PT and Brazilian telecoms company Oi, leaving PT shareholders with a markedly poorer deal.
The controversy surrounding this failed investment led also to an investigation and report by external auditors which has been ready for a month but only a preliminary version has been delivered to the stock market regulator and the PT board.
The audit aims to establish who was responsible for various investments made by Portugal Telecom in Grupo Espírito Santo companies since 2000.
The audit report apparently has some ‘interesting’ revelations and is said to be critical of the two previous Portugal Telecom chief executives Zeinal Bava and Henrique Granadeiro neither of whom remain with the company but will not be short of money due to impressive multi-million pay offs.
The big question is to determine who was responsible for the ruinous investment in Rioforte, and then, what to do about it.
