The retail giant Americanas entered into judicial recovery after detecting a BRL 20 billion failure in its accounting. For the president of the Brazilian Association of Investors (Abradin), economist Aurélio Valporto, the error is actually fraud.
In an interview with Brazil in fact, he claimed to have no doubt of an intentional wrongdoing. He explained that it occurred to minimize the company’s real debts, artificially increase its profit and distribute a good part of them to its main investors: Jorge Paulo Lemann, the richest in the country; Marcel Telles, the third; and Beto Sicupira, the fourth.
For Valporto, the three billionaires need to be investigated. First, because they were the main beneficiaries of the fraud. Second, because they have a history of controversial practices in the market.
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Valporto recognized, however, that the chance of punishing those who commit these crimes in Brazil is small. He also said that fraud like this hinders the development of the country.
“It removes all credibility from the financial environment,” he said. “Brazil’s stock market has become gambling, it has become a casino that doesn’t exist here.”
Check out key excerpts from the interview below:
Brasil de Fato: What happened in the Americanas?
Aurélio Valporto: It is clear that it was a fraud. I can say, with absolute certainty, because what happened was an accounting failure to increase the result (profit) of the company. What was a liability (obligation) ended up being appropriated by income accounts, which generated a profit that did not exist. This was distributed as prizes and dividends, something that is absolutely irregular. A monstrous fraud.
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How was this balance sheet rigged?
The details of this have to be investigated. But there was a company debt that wasn’t on the liabilities side of its balance sheet. Now, forensic expertise, a new audit, is needed to clarify the details of this maneuver. These are things that are still very hazy.
Shortly after announcing this “error” on its balance sheet, Americanas filed for bankruptcy protection. Does one thing have to do with the other?
The flaw was exposed. Clauses of loans taken with banks demanded accounting transparency from the company. When the accounting fraud was discovered, creditors demanded immediate payments. Americanas could not pay. He filed for judicial recovery.
Could this have been a ploy?
Judicial recovery is a legal instrument that ultimately reorganizes the company’s debts so that it can continue to exist. Now, it is also widely used in Brazil as an official default on creditors. In the case of the Americanas, it is a different situation because the creditors are also very large: BTG, Bradesco, etc. This created a battle of giants.
:: Americanas enters judicial recovery to escape bankruptcy ::
What is the responsibility of Americanas partners in this regard?
This will be one of the investigations to be done. They claim they had no knowledge. It’s hard to believe. Beto Sicupira, Lemann’s partner, was the man in charge of Americanas. It is very difficult to believe that he, in fact, did not know what he was doing. Mainly because we have a history with Kraft Heinz, in the United States, which ended up paying a very large fine. There is also the case of ALL Logística, which also presented accounting inconsistencies. It’s hard to believe they weren’t aware of what was being done there, especially since they were the top earners of the company’s dividends.
Who should have discovered this earlier and announced such an “error”?
The first line of defense comes from within the company itself. It is a publicly traded company, listed on the so-called Novo Mercado of B3 (São Paulo Stock Exchange), which requires high governance rules. But the truth is that it is common for Novo Mercado companies to hide scams that they are taking on creditors and investors. It was like that at IRB, with JBS, with OGX and other Eike Batista companies. B3 has a regulation. It should supervise, but it does not punish anyone.
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Should only the company and B3 inspect?
Also the audit committee of the companies themselves. In the case of Americanas, it has to be deeply investigated. There is also the supervisory board of the companies themselves. There is also the CVM (Comissão de Valores Mobiliários, a public body that regulates the capital market). Now, the CVM has no way to investigate in advance. She had even called the attention of Americanas’ auditors to be aware of accounting practices. So I think CVM didn’t fail.
Are there penalties for these cases?
This is one of the biggest problems in the market. Defending small investors and small creditors is very difficult. In the case of Eike Batista, we managed to sentence him to around 30 years in prison for crimes against the capital market. But this is in the features phase. In the case of investor reimbursement, this has been stopped since 2014. It has not been judged. The judiciary lacks seriousness and knowledge to understand the mechanics of crimes, which have a high impact on the real economy. Society suffers most from this, not just shareholders or creditors. There are people who have never heard of the stock exchange and will suffer the consequences because it impacts on an investment chain.
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How does it impact this chain?
First, it removes all credibility from the country’s financial environment. The primary function of the capital market is to attract investors so that they invest directly in the capital of companies, become their partners. You turn the saver directly into an investor. Instead of taking money from the bank, the company sells a stock to develop its business. But there is another problem in Brazil. There are digital influencers saying “buy this, sell that”. The Brazilian stock market became gambling, it became the casino that doesn’t exist here.
Speaking of credibility, as soon as the “error” of the Americanas was revealed, the Brazilian Association of the Beer Industry (CervBrasil) declared that something similar happens at Ambev, another company controlled by Lemann and his partners. What do you think about this?
So it is. I think it was rushed, but that’s my opinion.
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Lemann and his partners have a relevant stake in Eletrobras, which was privatized. Is this a risk for the company and the country?
It’s a big concern. What they want is simply to make money. But Eletrobras is economically strategic, as is Petrobras. It’s complicated to have an administration that values only profit, especially when it comes to energy. The price of energy goes up and hurts the rest of the economy.
Editing: Thalita Pires
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