International Financial Law Prof Blog

Editor: William Byrnes
Texas A&M University
School of Law

Tuesday, July 29, 2014

Banco Espírito Santo's former CEO arrested for Money Laundering & Tax Evasion as bank reports Portugal's largest loss, Espirito Santo Financial Group seeks creditor protection

Banco_Espirito_Santo_LisbonBloomberg reports that the major Portugal bank, Banco Espirito Santo, will record a $3 billion loss tomorrow (Friday), wiping out its excess capital rerserves, thus requiring it to raise capital to maintain a solvency ratio.  Meanwhile, its former CEO of 20 years, and family patriarch, Ricardo Salgado, was arrested on allegations of money laundering and tax evasion.

The WSJ reports that: 

Troubles at Portuguese conglomerate Espírito Santo International SA intensified Thursday after another of its units filed for creditor protection in Luxembourg and the group's main figure, former Banco Espírito Santo SA Chief Executive Ricardo Salgado, ... was detained in a money-laundering investigation.

Reuters reports that: 

The bank's links to the Espirito Santo family group and its troubled holding companies have wiped out around 50 percent from BES' market value in the last month. ...

Problems have been escalating for the family that founded the bank more than a century ago since accounting irregularities were identified in one of its holdings earlier this year.

Lexis' Law 360 reports that:

Espirito Santo Financial Group SA on Thursday became the third of the related companies to seek shelter from creditors, asking a Luxembourg court to institute a bankruptcy-like “controlled management” process after concluding that it could not meet obligations to customers in its commercial paper business or to creditors on its stand-alone debt obligations, according to a company statement. ESFG is 49 percent owned by ESI and is the largest shareholder of BES with a 20 percent stake.

Trading in ESFG shares had been suspended on July 10 over its potential exposure to ESI, which before its own insolvency filing had postponed making interest payments on some short-term debt securities. ESI’s request for controlled management was approved in court Tuesday, while Rioforte’s remains pending.

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