SAO PAULO Two Brazilian board members of Portugal Telecom resigned after learning of 897 million euros ($1.22 billion) of short-term investments the company made without consulting them, newspaper Valor Economico reported on Wednesday.
The Portuguese company invested in debt issued by Rioforte, a firm controlled by the owners of Espirito Santo Group, which is a major shareholder in Portugal Telecom.
One of the directors, Otavio Azevedo, chief executive of Brazilian industrial conglomerate Andrade Gutierrez, told the newspaper he felt "uncomfortable" learning of the investment in a press release, but he already had plans to step down from the board due to possible conflicts of interest.
Andrade Gutierrez is a key shareholder in Brazil's Oi SA, which is merging with Portugal Telecom.
Azevedo and Fernando Magalhães Portella, the head of Jereissati Participaçõoes, who also quit Portugal Telecom's board according to Valor, could not be reached for comment.
Shares of Oi and Portugal Telecom, which cemented their merger with a $3.7 billion share offering in April, have tumbled this week as analysts warned of potential credit risk from the Rioforte investment.
Regulators on Tuesday banned short-selling in shares of Banco Espirito Santo as the Portuguese bank attempted to allay concerns over problems with its parent company and possible losses in Angola.
(Writing by Brad Haynes; Editing by Leslie Adler)