Will tax payers foot bill for football boss’s losses?
The Portuguese tax payer may have to foot the bill for a €31 million debt to the public bank Caixa Geral de Depósitos taken out by former Benfica football boss Luís Filipe Vieira.
The Public Ministry’s criminal investigation into the Red Card case has accused Vieira of having washed his hands of the loan through a series of manoeuvres which ended up being paid for by a Resolution Fund part-covered by the banks and part-paid by the tax payer.
Luís Filipe Vieira carried out a series of bank moves to pay off a €30 million loan to CGD so that the costs would be covered by the fund (in other words, a large part paid by the tax payer).
The scandal goes back 10 years when real estate investment company Votion – Investimentos Imobiliários, SGPs, one of the companies that belonged to the civil construction group Promovalor – which belonged to Vieira – saw its accumulated €31 million debt called in by the bank.
Because of financial regulations imposed by the ‘Troika’ of international lenders which had bailed out Portugal to the tune of €78Bn in 2011, the bank was under pressure to clear the debt off its balance sheets.
Given the close business relationship between Ricardo Salgado of the Banco Espírito Santo Group and the Benfica football boss at that time, Luís Filipe Vieira managed to get a loan on 28 December 2012 for €7 million.
The money was lent to another company owned by Promovalor, Imosteps, which had been set up to invest in the Brazilian real estate market, and also involved Opway, a construction company that belonged to the Espírito Santo Group (GES), and therefore also headed by Ricardo Salgado.
The Brazilian real estate operation that involved the finance lent to Vieira went through on the same day that the Benfica president received a personal loan from BES.
BES financed Imosteps with a €34.5 million loan for the Brazil investment — the first of several tranches of loans that the company went on to receive from BES controlled by Ricardo Salgado.
Vieira channelled €6.5 million from his personal loan granted by Ricardo Salgado to pay off part of the loan from CGD contracted by his company Votion.
To cover the balance of Votion’s debt to CGD – €24.5 million — the Benfica president handed over 50% of a closed real estate fund (Fundo Imobiliário Fechado Real Estate) as security to cover the loan amount.
On 31 December, 2012, the property in this fund was valued at €51.5 million and with CGD now holding 50% (€25.75million) it looked like a good deal for the State-run bank which immediately made €1.25 million from the operation.
The problem was that the fund ended up making a huge loss over time and had accumulated some €38.32 million in losses.
The losses got worse, and by the end of 2019 CGD was saddled with an impairment of €85.8 million which meant that the bank, which has been liquidating its real estate assets allegedly on the cheap, stood to lose €24.5 million — an amount very close to the value of the assets in Vieira’s real estate fund that had been handed over to the bank.
This loss would have to be carried by the bank and because of its recapitalisation programme over the past few years, which inevitably meant clearing unrecoverable loans off its books, the monies partly came from the public purse.
Returning to the initial 2012 loans, the total amount of credit granted by BES to Imosteps reached €53.4 million within 18 months, with the last of five tranches, worth €8 million, paid in July 2014, just weeks before the centre-right Pedro Passos Coelho government decided to wind up BES after Ricardo Salgado was unable to find sufficient funds to keep the bank in the black, and ultimately ended up with the creation of Novo Banco to hold BES’s supposedly viable assets.
Moreover, days before BES was wound up, the Benfica president, it is alleged, managed to get the last tranche of the BES loan to Imosteps transferred to his personal account while getting the debt he had contracted in 2012 with BES ‘liquidated’ in the nick of time which, including interest, was €7.7 million. He did this, it is alleged, through a friendly contact at the bank.
The actual debts of Vieira were now transferred to the Novo Banco. In other words, Vieira’s debt to BES could no longer be attributed to him, and was lumped into the more than €54 million that Imosteps received from BES and now had been passed on to Novo Banco.
And it was this debt that Vieira, through behind the scenes manoeuvres and with the help of a straw man — his friend José António dos Santos better known as ‘Chicken King,’ managed to get control of last August by paying just €9 million (one-sixth of its value) while Novo Banco sold off a portfolio of unrecoverable debt, including some of Vieira’s, at an allegedly knock-down price.
The losses from these unrecoverable debts were then imputed by the bank to the Resolution Fund mechanism imposed by the troika of international lenders which had bailed out Portugal in 2011, and was underwritten by the banks (including CGD) to assume the risks of any future unrecoverable BES loans.
It is this manoeuvre by which José Filipe Vieira with the help of others under investigation, both within the banking world, his own companies and even his son, Tiago Vieira, which is currently under investigation by the Public Ministry as alleged fraud.
Textor wants to invest €100 million and take Benfica to new heights
In an interview in the newspaper ‘Sol,’ the US investor John Textor said that if he is able to take on a quarter share of SAD Benfica he will inject €100 million into the football company and turn the Portuguese football club into a world league club competing with the likes of Manchester City, AC Milan or Real Madrid.
This offer comes in spite of the rejection of his share buyout offer by the club’s new management board.
On Thursday last week, Textor said he was disappointed with the new board’s decision but said he was prepared to “buy up the shares of any shareholder who wants to sell out or who the board wants to leave.”
“I would never use my shares to go against the will of Benfica people and fans and would sign up to their will for the rest of the time I would be linked to the club,” he said.
Textor has also come up with the idea of buying Benfica debt, by guaranteeing Benfica’s bond issues and charging just 3% instead of 4%.
“Debt is never good, but if the financing terms were made by me, it would at least be cheaper,” said the US investor.
It would mean he would buy a portion of the football club’s debt at a time when the club is trying to close a deal on a bond issue of €35 million.
The new Benfica board says that it knew nothing about the agreement or negotiations made between ex-president Vieira and the US technology tycoon.
The board says it will continue to oppose the offer if it comes up on the agenda of the next shareholders general assembly meeting.