Submarine 'fees' concealed offshore to 'circumvent the tax authorities'

submarineToday's Expresso newspaper reveals what happened to the submarine ‘fees’ and the deliberate concealment of €27 million, hidden away 'to circumvent the tax authorities.'

The two submarines purchased from the German Submarine Consortium cost €880 million and Escom, a Banco Espírito Santo subsidiary, spent €2.1 million to set up and manage a secret fund in the Bahamas in order to hide the destination of the money.

The German Submarine Consortium (GSC) paid for ‘consultancy services’ provided by Escom, "We wanted to hamper access to this information and wait for an opportunity to regularise the taxes with better fiscal conditions," admitted Luis Horta e Costa, a director of Escom.

"In addition, we thought it would be complicated if it came to be know that there was a bonus distribution to the Espírito Santo family," he added. "At that time the country was different. If it were today would not do this."

In all, Ferrostaal, one of the consortium companies, paid €27 million to Escom for success in the sale of two submarines to the Portuguese State in 2004.

Of the money received by Escom, €5 million went to members of the High Council of the Espírito Santo Group including Ricardo Salgado, while €16 million ended up in the hands of three Escom directors and a consultant of Escom, Miguel Horta e Costa, the brother of Escom director Luis Horta e Costa.

The Escom money trail was at the center of the investigation that the Central Department of Investigation and Penal Action had been pursuing for eight years related to the suspicion that there had been corruption in the submarine purchases.

Last week, the prosecutors Josefina Escolástica and Júlio Braga closed the case, concluding that there were no indications that bribes had been paid to other parties in exchange for choosing the German consortium in the public tender.

According to Luis Horta e Costa, in addition to the €2.1 million spent on creating the secret fund in the Bahamas, there were €940,000 in financial costs because of two Escom loans from BES Cayman Islands to allow the Espírito Santo family and managers to receive their ‘fees’ in advance, in fact as early as as October 2004, just days after the contract was awarded.

The fund set up in the Bahamas, the Feltree Investment Fund, received €19 million from an account held by the fund in POBT Bank and Trust in the Bahamas. Of this €19 million, €13 million was for the directors and for the Escom consultant.

In addition, an Espírito Santo company in the British Virgin Islands was used, Afrexport, to receive €8.25 million, €5 million of which went to Espírito Santo family accounts at KBL Swiss Private Bank in Geneva, and €3 million went to Escom.

According to Luis Horta e Costa, Escom had other expenses associated with the submarines deal. He paid €750,000 to the Vieira de Almeida law firm for legal services; €621,000 to BES Investimento for financial advice; €500,000 to Intelli, for technical advice and even set up a branch in the United Kingdom just to handle this trickery which cost £340,000, including salaries to employ a stooge.

Finally, €360,000 was spent in Portugal on travel expenses and a monthly retainer of €5,000 paid over several years to Miguel Horta e Costa, the man who managed the submarines dealings with the Germans from the start, plus a bonus shared with the three Escom directors.

Faced with the statements of Ricardo Salgado made at a meeting of the Superior Council of the Espírito Santo Group in December 2013 – where taped conversations later were made public - in which the banker refers to a "part that has to be delivered to someone on a given day," Horta e Costa said "Dr. Ricardo Salgado knew perfectly well that the money was for my brother. The point being that he did not think we should give him any money, even though it was Miguel Horta e Costa who brought the business to Escom."

All in all, the behaviour of the Espírito Santo family, especially Ricardo Salgado, may be viewed as deceptive, avaricious and designed to avoid the taxman.

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0 #4 Roger Thomas 2014-12-22 14:38
Just want to echo the previous points.

Particularly Ferns comment that ... have any (Portuguese) .... sufficient moral fibre to put anything right?

Every time you switch on the Portuguese TV it is apparent that most of the interviewing of the great and the good implies a 'I don't believe this is happening' from both parties.

The grandee and the interviewer (who may also be quite well connected to have the job)

Foreigners should be aware that the Portuguese consider that their own TV and press to be 'controlled' to an extent. So what gets into the news has been directed by the 'elite'.

And may have been published for a reason - not least, if a prosecution, to result in an 'unsafe verdict' as 'our boy was being prejudged'.

Witness the RTP 1 visit to Macao last night to offset all the Hong Kong democracy nonsense. The spin put on this news item was as a successful tourism venue and gave us glimpses of the 'old Portuguese buildings'.

But nothing at all about what concerns mainland China - the very serious culture of crime and corruption left behind by the Portuguese !
-2 #3 DennisF 2014-12-22 10:47
"...there were €940,000 in financial costs because of two Escom loans from BES Cayman Islands to allow the Espírito Santo family and managers to receive their ‘fees’ in advance just days after the contract was awarded."

So Salgado could not wait to get his hands on his 'fees' and ordered Escom to borrow the full amount from a BES bank just to pay Salgado and the other family bloodsuckers. Unbelievable. The greed of this multimillionaire is simply breath taking.
-3 #2 Fern 2014-12-22 10:44
What is yet again dismally clear is how unprepared' Portugal was 28 years ago to be in the European Union.

And it how it has so totally misled us north Europeans over the years since - who have come here to live and attempt to work.

This is not 40 + years ago - just 10 !

So we hear that "At that time the country was different. If it were today would not do this."

As often said by others, here, on expat websites and in bars and cafes across Portugal and the UK - abysmal.

And more worrying given the Portuguese well known and 'understandable' inferiority and racism - the hopelessness of the EU in thinking things 'will get better'.

Because few Portuguese - with a brown envelope already in their hands - have anything like sufficient moral fibre to put anything right.
-2 #1 PeterP 2014-12-22 10:42
These BES / Escom dealings were designed to be as confusing to the taxman as possible. Finally declaring the money, in Salgado's case only when there was an amnesty for offshore tax evaders, is not an end to this devious, greedy and malignant affair. Well done for sticking to this story even though mysteriously the submarine corruption case is officially over.

You show the type of slimy characters involved at the top of Portugal corporate tree, especially withing BES Group, who think it fine to spend days dreaming up tax evasion schemes and then go all 'pity me' when it bows up in their faces

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