Ex-KMPG boss accused BES accountant of cooking the books

The former president of the KPMG auditing company, Sikander Sattar, took the stand on Tuesday in the BES/GES case accusing the banking group’s former accountant Francisco Machado da Cruz (pictured) of cooking the books at the Espírito Santo Group (GES).

Called as a witness to Lisbon’s Central Criminal Court, the former president of KPMG Portugal described the auditor’s relationship with GES over time and the various stages and procedures involved in doing the group’s accounts until the collapse of BES in August 2014.

Sikander Sattar’s testimony covered the period in which he realised there was a ‘hole‘ in the accounts at ES International (ESI), the holding company for the financial institution’s financial and non-financial areas, and the “error” argument initially made at the end of 2013.

“All the evidence we had at that time confirmed the (accounting) mistake, but there was no evidence that the error was intentional,” Sikander Sattar said about the increase in ESI’s liabilities, explaining that KPMG did not carry out a forensic audit, but only a limited special purpose review, and that “even ESI could not obtain information about its own investments, who the counterparties were, or which funds” were involved.

The Public Prosecutor’s questioning of the witness was interrupted by the president of the collective of judges, magistrate Helena Susano who asked how the mistake in the accounts could be explained. Sikander Sattar gave details of a meeting held on January 14, 2014, in which he confronted Machado da Cruz, who was the chief accountant at GES between 2002 and 2014, and argued that the mistake argument “was not credible”.

“The mistake was justified from the perspective that Dr. Machado da Cruz was very busy with other responsibilities he had in the group, that he did not have a strong enough structure to be dedicated to ESI, that ESI’s management was not a ‘real-time’ management, and that its administrators had responsibilities in the financial (ESFG) or non-financial area (RioForte),” he described.

Sikander Sattar said that it was then that he met the ‘commissaire aux comptes’ (GES accountant), in a meeting at which Ricardo Salgado, José Castella, João Martins Pereira and Carlos Calvário were also present, with Machado da Cruz explaining that there had been “a mistake”.

“I confess that I could not contain myself and accused Machado da Cruz of having committed fraud,” the witness revealed, while in the row of chairs for the defendants, the former GES accountant, who has been present at all trial sessions, shook his head.

“As the mistake was being repeated systematically, I was already getting tired, because that didn’t seem believable. Can errors be made in calculations of impairments, forgotten invoices…, over issues regulated by the CMVM (Securities Commission), which were screened by BESI and which were public issues – several (mistakes) over time and all of them omitted?”, he asked.

Machado da Cruz was not pleased and said he was going to file a lawsuit against me. And when I am threatened, my tendency is to repeat (my impression) and I pointed out that he had committed fraud, ”he continued.

The presiding judge asked whether Machado da Cruz had taken responsibility for the error, to which Sikander Sattar clarified that he had not, adding that the reaction to the accusation was “total silence” from the others at the meeting in the room.

The former president of BES, Ricardo Salgado, the main defendant in the BES/GES case, stands accused of 62 crimes, allegedly committed between 2009 and 2014.

The case continues…