RIO DE JANEIRO, BRAZIL – A lawsuit that blocked R$778 million (US$195 million) from Thor Batista, son of Eike Batista, tries to trace the path of resources that the former businessman sent abroad.
The lawsuit, filed by lawyer Bernardo Bicalho, administrator of mining company MMX, aims to ensure full repayment to creditors of the company under judicial reorganization, but also fulfils another function: that of revealing offshore accounts in tax havens that would play the role of hiding resources at a time when Eike’s empire of Eike fell into ruin.
The arguments to request the blocking of Thor’s assets – determined preliminarily by Judge Cláudia Helena Batista of the 1st Financial Court of Belo Horizonte and confirmed by three judges of the Minas Gerais Appellatte Court, bring evidence of the attempt to hide assets using a tangle of offshore accounts in tax havens, which do not question the origin of funds.
Although the blockade has been confirmed, the merits of the action have not yet been revealed. Although the lawyers believe that Eike’s family has, in offshore accounts, the necessary resources to cover the blockade, they say that the process of searching for this money is still ongoing.
A source close to Eike Batista said, however, that the businessman “by no means” has sufficient resources to cover this debt.
In addition to Thor Batista, who until 2013 was dependent on Eike, the decision includes six legal entities, four of which are based in tax havens: Meisterschaft Holding (in Belize), Aux Luxembourg Sarl and Aux LLC (both in Luxembourg), and the 63X Master Fund (in the Cayman Islands). The other listed companies are the EBX holding company, the parent company of MMX located in Rio de Janeiro, and OTX Fund LLC, USA.
At the height of Group “X” – which controlled businesses such as OGX in oil, OSX in shipbuilding, and LLX in logistics – the Brazilian entrepreneur became the 7th richest man in the world in 2012, with a fortune of US$34.5 (R$138) billion.
The Flow of the Money
But why wasn’t the money sent abroad detected before? According to lawyer Rodrigo Kaysserlian, president of the Brazilian Institute of Asset Tracking and assistant to Bicalho in the MMX process, the sale of shares was made through the purposefully complex structure that Eike set up for his business.
In the case of MMX, the operating company (owner of the mines) was called MMX Sudeste and controlled by the MMX holding company (which issued the shares on the Stock Exchange). This holding company, in turn, had Eike Batista (as an individual) as controlling shareholder and two legal entities, Mercato and Centennial offshore.
According to the lawyers, Centennial was the first link in the money remittance chain abroad in the strategy of taking advantage of the bonanza to stock resources for the inevitable storm that would come when the company did not meet its ambitious goals.
According to the complaint, Centennial, which originally obtained the financial resources from the sale of MMX shares, began to supply the 63X fund in the Cayman Islands. This fund later transferred money to another offshore company located in Belize, the Meisterschaft.
Meisterschaft emerged well after Centennial, which was part of the creation of the MMX holding company in 2005. According to the investigations, the company was opened by Thor Batista after a donation of R$ 130 million in cash was received from his father in 2013.
Thor, soon after receiving the money, went to the USA in January 2014, hired a lawyer in Miami, and opened Meisterschaft in Belize. This occurred months before MMX requested judicial recovery.
Both the creation of complex legal structures and father-to-child donations are not in themselves illegal. However, Kaysserlian says that “all financial fraud is covered by some form of legality.” The transfer to the child is not illegal, as long as the donation is not a way to protect resources owed to third parties.
Another lawsuit filed in the United States calls for the blockade of all Eike’s companies and their affiliates throughout the world. Both Bicalho and Kaysserlian believe that the structure of offshore accounts is much more complex than that already identified in the action against Thor Batista.
“There may be dozens or even hundreds of legal entities,” says Bicalho. Thor’s lawyer didn’t want to speak. Eike’s representatives did not return the contacts.
Many Angry Faces
The dispute over Eike’s money – regardless of the value that still remains in the hands of the businessman – is heated. At the beginning of this month, a court blocked R$1.6 billion (US$400 million) from the businessman and his two sons, Thor and Olin.
The measure was requested by the Federal Public Prosecutor’s Office within the scope of Operation Lava Jato.
In addition to the lawsuits linked to other companies in the group, the holding company that controls MMX had its bankruptcy decreed by the Rio de Janeiro courts a little less than two weeks ago. However, this is also a decision subject to appeal.
MMX’s trustee, Bernardo Bicalho, expects to have priority in receiving the amounts. To go forward, he relies on the case law precedents from the Banco Santos litigation. According to him, although the argument that Eike Batista should compensate the country as a whole for the losses of its economic group is valid, people who provided services or provided products without receiving the amount due should be reimbursed before the trustee.
This was what happened in the case of the bank controlled by Edemar Cid Ferreira. Both the institution’s assets and those of the controller are being sold and the amount collected transferred to direct creditors. This is what Bicalho expects to happen in the case of MMX, whose case is still in the lower court and whose conclusion is expected to take years.
Bankruptcy attorney Eronides Rodrigues dos Santos of the Public Prosecutor’s Office of São Paulo participated in the tracking of assets of Banco Santos and achieved a ruling in the Superior Court of Justice (STJ) that guaranteed preference to direct creditors of the institution before the reimbursement of criminal proceedings. He says he believes that the same logic can be applied to the case of MMX.
Possibility of return
Although MMX’s creditors have already approved a court-ordered turnaround at a discount of more than 80 percent, this reality can be changed if the decision was taken on a false basis. In other words, if it is now proven that there are funds not previously known to exist, the recovery agreement may be reversed.
“It only makes sense for the State to have priority in receiving resources for crimes against society, such as drug trafficking. Otherwise, the priority must be the direct victims of the company in question”, says the prosecutor specialized in bankruptcy.
The information is from the newspaper O Estado de S. Paulo.