Pharol, the company formerly known as Portugal Telecom,* managed to lose €65.9 million in the first quarter of the year, 53% more than in the same period last year, according to its accounts that can be found on the CMVM Stock Market Regulator’s website.
The losses were blamed on appalling results from Brazil’s Oi in which Pharol owned 22% of the shares during the accounting period.
Oi lost €64.1 million but Pharol make clear the fact that it now holds no direct stake in Oi as it has transferred some of its shareholding to fully owned Dutch offshoot Bratel and to other associated companies in an operation designed to spread the pain through its subsidiaries. Either way, Pharol is affected by Oi’s dire performance.
Pharol also is carrying a loss of €897 million from PT’s idiotic loan to Espírito Santo’s Rioforte property offshoot which failed to repay a cent before seeking creditor protection in Luxembourg and subsequently going into administration.
One of the main events in the first quarter for Pharol is the legal claim it lodged against auditor Deloitte and PT’s former Chief Executive Zeinal Bava, Director Henrique Granadero and Luís Pacheco de Melo, a former director of BES Investimento.
Bava has denied any knowledge of the loan to Rioforte but was forced out by powerful shareholders. The other two directors authorised the loan even though a basic check on Rioforte would have revealed its poor asset position. Espírito Santo of course was the largest single shareholder on the PT board and had used PT's cash on other occasions.
Zeinal Bava then went to work in Brazil as CEO of Oi, a position that soon ended with Bava receiving a pay-off of €150,000 per month for three years.
To this monthly amount can be added an estimated €50 million earned during his career at Portugal Telecom, plus bonuses during the PT merger with Oi.
Further suspicions were raised after the Panama Papers were released. Bava admitted to receiving more than €18 million from ES Enterprises, the Espírito Santo Group offshore company used to pay previously untraceable sums to favoured politicians, journalists and businessmen.
The money was transferred to a personal account that Bava held ‘abroad’ and was “to finance the purchase of Portugal Telecom shares by senior executives of the company.” Bava said that the acquisition of shares was never implemented and that he returned the money.
The action against Deloitte is for "violation of contractual duties as the external auditor of Pharol (sic) which were appropriate because of the losses made on investments in debt instruments issued by companies belonging to the Espírito Santo Group."
Pharol is after compensation for the difference between the €897 million loan and any amount it may receive from the Rioforte insolvency proceedings.
The action against those former directors was due to their alleged "violation of the respective legal and contractual duties."
In the meantime Pharol, the once proud PT, limps along with losses mounting and its share price losing 68% in value in 2015 alone.
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* Confused as to why there are two PTs?
PT Portugal SGPS SA (also known as Portugal Telecom or PT) is the largest telecommunications service provider in Portugal.
Since June 2, 2015, PT Portugal has been a wholly owned subsidiary of Altice Group, a multinational cable and telecommunications company.
Portugal Telecom, SGPS SA was split in separate companies: PT Portugal (owned by Altice) and Pharol (formerly PT SGPS), which owns a reducing stake in Oi as it divests for accounting purposes.
