LISBON--Former Banco Espírito Santo SA Chief Executive Ricardo
Salgado on Thursday dismissed findings from an audit conducted into
the bank's collapse that pointed the finger at his administration
and accused the country's central bank of leading a smear campaign
against him.
In his second public appearance since the bank failed in August,
Mr. Salgado told a Portuguese parliamentary commission that the
audit ordered by the Bank of Portugal and conducted by Deloitte
lacked proof and relevant information for many of its conclusions,
which were incomplete and mostly wrong, he said. Mr. Salgado also
accused the central bank of releasing only parts of the audit and
of omitting four pages of disclaimers from Deloitte about the
limitations of the audit.
He repeated many of his statements from his first hearing in
December, saying decisions from the country's central bank--and not
his management-led to the bank being bailed out and broken up in
the summer.
"I will keep defending myself to the end," Mr. Salgado told
lawmakers. He said he regretted that people were hurt by the
lender's collapse, including clients, shareholders and bank
employees.
Banco Espírito Santo's woes were triggered by problems at its
parent, Espírito Santo International SA, which was found to be in
serious financial trouble after hiding several billions in debt
from its accounts. Mr. Salgado, the patriarch of the Espirito Santo
family, sat on the board of Espirito Santo International, which has
since become insolvent.
Once Portugal's central bank identified Espirito Santo
International's problems, in late 2013, it imposed a series of
rules to protect the bank, which at that point was a lender to its
parent and seller of its debt. Nonetheless, Banco Espírito Santo
had to be rescued and broken up in August last year, after
reporting high losses over its exposure to Espirito Santo
International and related entities.
At the time, Bank of Portugal Governor Carlos Costa said the
bank had "developed a fraudulent funding scheme between the
companies belonging to the group" to prop up the troubled
group.
Mr. Costa then ordered a forensic audit into the bank. The
audit, conducted by Deloitte and partly released earlier this
month, identified more than 20 instances where Banco Espírito
Santo's management possibly broke rules established by authorities
to protect the lender from its parent.
For instance, it found that the bank continued to increase its
exposure to Espirito Santo entities and it used an "escrow account"
opened by Espirito Santo International to reimburse retail clients
to pay back non-retail customers, including to repay loans provided
by two Portuguese banks.
Mr. Salgado, who has previous denied any wrongdoing, dismissed
those findings. He said the bank increased its exposure only to
financial entities of the group, which was allowed. He also said
the loans given by the two banks were actually used to repay retail
clients.
Mr. Salgado said he couldn't comment on another part of the
audit, which focused on the bank's Angolan operations, because that
was released two days ago.
The audit found serious problems at the internal controls of
Banco Espírito Santo, which, for example, allowed it to increase
financing to its troubled Angolan unit without formal
authorization.
The audit pointed to possible deficiencies in money-laundering
controls, and identified instances when money from the bank in
Angola was transferred to offshore vehicles whose beneficial owners
were Banco Espírito Santo managers.
Three other audit chapters, including one focusing on what Mr.
Costa called a "fraudulent funding scheme" are still being
completed by the auditor.
The Bank of Portugal and the Portuguese prosecutors' office has
opened several investigations into the collapse of the bank and the
Espírito Santo group. In parliamentary hearings, several members of
the Espírito Santo family said the group had a centralized power in
the figure of Mr. Salgado.
Mr. Salgado dismissed that on Thursday. "I don't have everything
to do with everything, as it has been suggested many times," he
said.
Write to Patricia Kowsmann at patricia.kowsmann@wsj.com
Access Investor Kit for Banco Espírito Santo SA
Visit
http://www.companyspotlight.com/partner?cp_code=P479&isin=PTBES0AM0007
Subscribe to WSJ: http://online.wsj.com?mod=djnwires