The Half-a-Billion-Dollar Scam of Espírito Santo Bank in Angola

In the plunder that has been carried out in Angola, little has been said about the extraordinary role of Portuguese facilitators – especially bank executives, lawyers and intermediaries – in setting up related operations. Little is also said about the extremely harmful role they play in Angola, while pretending to be above reproach.

Maka Angola brings to light the US $518.5 million operation orchestrated in 2013 by José Fernando Faria de Bastos, a Portuguese lawyer living in Angola, and Rui Guerra, a Portuguese citizen and then-CEO of Banco Espírito Santo Angola (BESA).

Let us start on June 28, 2013. On that day, BESA carried out five credit operations to five shell companies totalling US $379 million. This operation financed the purchase of assets of Espírito Santo Commerce (Escom), 66 percent owned by the Espírito Santo Group (GES) of Portugal, and 30 percent by the Portuguese-Angolan citizen Hélder Bataglia. An addendum made in September of the same year to one of the credits raised the total amount to US $518.5 million. As BESA acknowledged in the approval of credits, each of the five companies had only one employee: José Fernando Faria de Bastos, the Portuguese lawyer.

The money made from the operation would then serve to repay Escom’s debt to BESA – 56 percent owned by the Portuguese bank Banco Espírito Santo (BES – now Banco Novo), which in turn was controlled by the Espírito Santo Group.

Why was this operation within the same group? BESA was consolidating its accounts with BES in Portugal. Escom’s high debt to BESA had to be reported to Portugal’s Central Bank (the Bank of Portugal) through BES Portugal and would appear in BES Group’s accounts as expired debt (impairments). According to financial analysts consulted by Maka Angola, BESA would have to make a provision on the total amount of Escom’s debt to cover losses. The BES Group’s report to the Bank of Portugal would have to be submitted on June 30, 2013. Hence the haste to purge more than half a billion dollars of debt from Escom, which you’ll remember was owned in part by GES, from BESA’s accounts. The total debt was over US $600 million.

The scheme established was used to cover the negative accounts of the Espírito Santo Group (GES), headed by the now disgraced banker Ricardo Salgado in Portugal, and at the expense of the Angolans.

On the same day of the bank transfers, June 28, 2013, BESA shareholders increased BESA’s capital by 500 million dollars. In the same meeting, the shareholders appointed the current ruling party MPLA Secretary-General, Paulo Kassoma, to be the Chairman of BESA, a position he holds in the renamed bank, now known as Banco Económico.

The five shell companies and FBL’s attorneys

On June 26, 2013, two days before the credits were granted, the following financial vehicles were created in Guiché Único de Empresas (the One-Stop-Shop for Companies):

• Casota – Administração em Investimentos e Bens Mobiliários e Imobiliários, S.A [Management in Investments, Movable Property and Real Estate];
• Enignimob – Administração em Investimentos e Bens Mobiliários e Imobiliários, S.A;
• Prismódico – Administração em Investimentos e Bens Mobiliários e Imobiliários, S.A;
• Schemata – Administração em Investimentos e Bens Mobiliários e Imobiliários, S.A;
• Urbanlab – Administração em Investimentos e Bens Mobiliários e Imobiliários, S.A.

These commercial companies were all created by five members of the reputed law firm Faria de Bastos & Lopes Advogados (FBL), with the same shareholder structure: José Fernando Faria de Bastos (sole manager of all companies), Victor Manuel Évora de Ceita, António José Caxita Marques, Laurinda Jacinto Prazeres Monteiro Cardoso and Anacleta Cipriano. Faria de Bastos and Vítor Ceita are founding members of FBL and, at the time, had António Caxita Marques and Laurinda Prazeres Cardoso as partners, and Anacleta Patrícia da Silva Cipriano as associate.

All companies were allocated the address of the FBL office at Rua dos Enganos, No. 1, 7th Floor, in Luanda as headquarters.

The clumsiness of the proposal and the granting of credit

In the documents consulted by Maka Angola, it is strangely noteworthy that the financing proposals appear in the bank’s system as having been submitted on January 21, 2012, a year and a half before the companies were created.

Yet, the applications for the financing of the five companies, signed by the sole manager José Fernando Faria de Bastos, were submitted to BESA on June 25, 2013, one day before the companies were legalized. As a guarantee, José Fernando Faria de Bastos mortgaged the properties that he would acquire.

On June 27, 2013, two days after receiving the proposal and one day after the companies were legally registered, the BESA manager granted the first five credits, worth US $379 million.

On the same day – June 27 – the real estate brokerage firm Proprime submitted the evaluation reports of the real estate assets and land to be acquired. Based on these reports, the management of BESA read and approved everything—a deviation from normal practice. Oddly, apart from the CEO Rui Guerra and executive board member Pedro Cruchinho of Portuguese nationality, BESA’s credit council members were not taken into consideration in these operations. The word “absent” is written in the credit grant where the Angolan members of the credit council should have signed.

Proprime is a company created by Progest – Technical Projects, Consulting and Management, Limited (Angola), in partnership with Prime Yield (Portugal). Progest is headed by Manuel Alfredo Resende de Oliveira, the first minister of Construction in Angola, appointed by Portugal during the transition government of 1975.

A source familiar with the process indicates the peculiarity of “a very large amount of credit having been granted in a single day, with no formalization of contracts nor verification of guarantees, and considering that interest and capital would only be paid three years later”.

On July 3, 2013, unaware of the fact that the credits had been granted and the funds disbursed, Clóvis Lara Martins Rosa, legal counsel from the Credit Risk and Control Department, sent his analysis of the credit requests for the five financial vehicles to BESA’s Executive Committee.

According to him, none of the five companies had presented the Diário da República [Government Daily Gazette] with information about their constitution as companies. In fact, none of them had been, as of the date, published in Diário da República, a requirement for a company to operate legally.

The sole manager of all five companies, José Fernando Faria de Bastos, had not even presented any personal identification documents. In addition, none of the companies presented minutes of shareholder deliberations to obtain financing with BESA.

Questions and answers

Several questions were sent to each of the main players in the operation, namely lawyer José Fernando Faria de Bastos, Rui Guerra (then CEO of BESA) and Hélder Bataglia (then chairman of Escom), but none replied. After the publication of the Portuguese version of this investigation, José Fernando Faria de Bastos sent his rebuttal, which was published in full.

“FBL Advogados, via some of its partners and lawyers, provided certain services to a client, including the incorporation of the companies referred to in the article published by Maka Angola, and the representation of these companies in the undertaking of certain formal acts,” says the statement.

The law firm claims that it “had no knowledge of any plan to defraud the interests of Banco Espirito Santo Angola or third parties and certainly did not plan or counsel any of its own clients in this regard.”

Furthermore, it continues, “neither FBL Advogados nor any of its partners or attorneys benefited, either directly or indirectly, from any financing, commission, compensation or any other advantage provided by Banco Espirito Santo Angola, whether or not related to the finances described in Maka Angola’s article. “

The acquisitions

1. Enignimob – US $260 million

Enignimob received funding of US $120 million as of June 28, 2013 (like all other companies) and an additional US $140 million in September of that year.

The financing was used to acquire shares in companies and two plots of land.

Thus, Enignimob acquired 100 percent of the shares of the Belavista Condominium owned by Escom. In fact, according to documents consulted by Maka Angola, this referred to the acquisition of a vacant lot of 198 acres in Belavista, in the coastal province of Benguela, for US $113.2 million.

Maka Angola knows that Escom bought this land for one million dollars from José Paulo Pinto de Sousa – known in “Operation Marquês” as the cousin of the former Portuguese Prime Minister José Sócrates – and that BESA was aware of the acquisition. Regardless, BESA financed a shell company to buy from Escom a piece of land 100 times more expensive than its real value, knowing that it would get the land for mortgage.

Moreover, the Proprime report assumes that it completed the evaluation on June 27, 2013, without ever having visited the site and based only on information provided by Escom. The report was signed by Portuguese citizens Francisco Barros Virgolino (now Prime Yield’s commercial coordinator in Portugal), as evaluator, and Nelson Rêgo as director general.

Another wasteland of five acres, in Luanda’s Talatona District, was valued at US $61 million and bought for that amount. This piece of land was also “stratospherically assessed by Proprime”, according to a source linked to the scheme. Nevertheless, the Proprime report assessed the land in Talatona at US $32.8 million. Additionally, according to documents collected by Maka Angola, this same land had been acquired by Escom for just over US $500,000.

“Regarding the properties referred to in the article, Proprime, as requested by the client, Escom, elaborated and produced a technical evaluation in accordance with the information provided by the Client”, says Proprime in a statement after the publication of the Portuguese version of the investigation.

According to the company, “all the evaluation reports were elaborated taking into account previous visits to the properties made by Proprime’s experts. It is therefore completely false that the properties, any of the properties, would have been evaluated without technicians having visited the site.”

“Proprime never knew about, and has no knowledge, nor was it required to know, of any financial operations related to the properties evaluated on the basis of the reports submitted. These reports explicitly state that prior to any actions being undertaken, all assumptions should be validated”, it stresses.

BESA granted Enignimob a loan of US $25 million for the acquisition of three apartments and 92 parking spaces in the Escom building in Cruzeiro.

Whereas the purchase of unspecified apartments in the Skycenter Building, one of the four of the Escom Towers, was made for US $19 million dollars, obviously paid for by BESA.

Other expenses include the acquisition of 21 percent in each of the three shell companies created by Escom, namely Urbantu, Neoinvest and Drina. This acquisition was made for an amount equal to US $3.6 million each, totalling close to US $11 million.

“There are doubts about the legal situation of each property and the encumbrances that may exist, as well as all the steps necessary to transfer property,” the source said.

2. Prismódico – US $117 million

BESA granted credit to this shell company to acquire apartments from Escom in the Aquaville Condominium in Talatona. As a guarantee, BESA mortgaged the referred property before purchasing it.

A view of the Acquaville Condominium, in the Talatona District.

On the day of approval of the contract, as in all other cases, Proprime prepared the assessment report of the property, worth US $171 million, free of any encumbrances or charges.

However, the property could not be sold as a complete unit because many apartments had already been marketed. According to Maka Angola, BESA knew that the initial value of the apartments available for sale by Escom did not exceed US $20 million.

According to the documentation consulted by Maka Angola, at the time of acquisition the Aquaville Condominium faced several problems due to delays in completion of the work. There were disputes with customers who had purchased apartments and debts from suppliers that had not been included in the valuation.

BESA’s jurist Clóvis Lara Martins Rosa notes the absence of any legal document relating to the apartments for sale in Acquaville, as well as the pre-contract agreement for them.

3. Urbanlab – US $82 million

Of the amount granted to Urbanlab, it arguably bought the world’s most expensive 32,291 square foot lot in the Condominium Quinta Rosalinda from Escom for US $54 million.

Initially, Escom reported to BESA that it had made a down payment of US $10 million for the land and that it still had to pay US $21 million. This same lot went from US $31 million to US $54 million in BESA’s accounts.

Regarding this transaction, BESA’s jurist questioned the absence of a contract for the assignment of the land, the land registration certificate, location sketch, building permit, and architectural and engineering projects.

The Quinta Rosalinda Condominium, where a lot cost US $54 million.

As for the apartments in the Skycenter Building, one of the three Escom towers, the information available at the time was also lacking – no pre-contract agreement, no property cadastre certificate, nor an up-to-date property registration certificate.

4. Casota – US $53 million

The bank loan was used to acquire a plot of land in Talatona and 33 percent of the company Imolap – Sociedade Imobiliária Lar do Patriota, Lda., which belongs to Escom. Casota gave as guarantees the properties that it would acquire with the loan.

However, the following information on the land was also non-existent: the contract for the assignment of the land, land registry certificate, location sketch, building permit, and architectural and engineering projects.

As for the shares in Imolap, the situation was no better. There was no transfer of share contract, nor general assembly minutes with the record of the decision to transfer said shares.

5. Schemata – US $6.5 million

Thirty five percent of the capital of two ghost companies of Escom’s – Turizaire and Zaimob – were acquired for a total value of USD $5.37 million and USD $377,000. The remaining USD $231,000 served as commission.

Shares in these companies were sold without a share transfer contract nor general assembly minutes with the decision of transfer for such shares. According to documents consulted by Maka Angola, neither the identification documents of the representatives of these companies nor their commercial registration certificates were presented.

The legal point of view

According to the opinion of a legal counsel who prefers anonymity, the granting of more than half a billion dollars of credits, as described above, corresponds to several crimes of fraud “foreseen and punishable by articles 450 and following of the Angolan Penal Code”.

According to this legal counsel, all parties, including his fellow lawyers from Faria de Bastos & Lopes Advogados (FBL), “could have committed the crime of fraud in any of its forms and degrees of co-participation.”

The crime of fraud is characterized by the intention to obtain unjust enrichment for oneself or for a third party, by means of a mistake or deceit about facts astutely provoked to lead others to practice acts that cause them or another person property damage.

For the legal counsel, there was no reason for the bank to grant loans to recently established companies with no credit history or reputation in the market.

The loss for the bank and unjust enrichment amounted to USD $518.5 million.

According to him, a brief analysis of the case confirms the presence of typical elements of fraud.