(Recasts to add confirmation, details on ongoing probes,
By Jeb Blount and Juliana Schincariol
RIO DE JANEIRO, April 11 Eike Batista, who was
Brazil's richest man for most of the past decade, is under
investigation by securities industry watchdog CVM for allegedly
engaging in insider trading while he chaired his now-bankrupt
oil-producing and shipbuilding firms.
In a statement sent to Reuters late on Friday, Rio de
Janeiro-based CVM confirmed that Batista is a respondent in six
of nine probes that executives of his Grupo EBX conglomerate are
facing for breaching securities rules. In two of them,
regulators are examining whether Batista allegedly took
advantage of his access to privileged information.
CVM also listed a dozen probes questioning financial and
other data unveiled by oil company Óleo and Gás Participações SA
and four more firms he controlled through EBX. If the
probes lead to criminal charges against Batista, it would be yet
another major blow to a businessman once hailed as the nation's
model entrepreneur and a symbol of Brazil's economic success.
"If this turns out to be true it will be excellent news for
investors who lost so much with OGX," said Rodrigo Bornholdt, a
partner with Bornholdt Advogados in Joinville, Brazil, which has
been organizing minority shareholders for a lawsuit against OGX.
"This would make it much easier for them to sue Batista, the
corporate directors and the company."
The demise of his energy, logistics and mining empire, which
two years ago was valued at about $60 billion, ended up in OGX
filing for Latin America's largest-ever bankruptcy in October.
Under CVM regulations, Batista could face fines and be
banned from running a listed company. But he could also face
criminal prosecution - which could put him in jail for as many
as five years - and separate civil penalties if individual
investors and companies sue him for damages, Bornholdt added.
Representatives for Batista, Oleo and Gas, and OSX did not
immediately respond to requests for comment. CVM's insider
trading case for OGX is under the code RJ2014-0578 and for OSX
under the code RJ2013-13172.
According to a Valor Econômico newspaper report early on
Friday, CVM wants to determine whether Batista also withheld
information that was unfavorable to some of his business while
encouraging investors to buy more stock in his companies. During
that time, Batista sold shares of the company, as well as its
sister company and shipbuilder OSX Brasil SA.
Valor, which had access to the content of the probes, also
said Óleo e Gás, formerly known as OGX, waited at least 10
months to inform shareholders that four oil fields were not
Some of the luster that helped bring hundreds of billions of
dollars into Brazil in the past decade, partly because of
Batista's meteoric rise, is gone. Like his promises of fast and
"idiot proof" returns in his various commodity and logistic
ventures, Brazil's economic boom has since fizzled into four
consecutive years of lackluster growth.
The bankruptcies of OGX and OSX could have also helped weigh
down on confidence in Brazil's capital markets at a time of
sluggish growth, executives such as Edemir Pinto, the chief
executive of financial bourse BM&FBovespa SA said a few months
OGX shares have lost 99 percent of their value since 2010
and are no longer a component of Brazil's Bovespa index. OSX,
which is also seeking bankruptcy protection, is entirely reliant
on OGX for revenue.
In a filing on July 1, 2013, OGX said the Tubarão Azul,
Tubarão Gato, Tubarão Tigre and Tubarão Areia fields were not
commercially viable, kicking off the long decline of EBX.
Some of the ongoing probes showed Batista, whose companies
are now mostly in bankruptcy proceedings or have been sold, had
access to information that was not communicated to the market
when he sold shares of OGX and the shipbuilder prior to July 1,
possibly in violation of Brazil's rules on using privileged
information, according to the newspaper.
Batista still controls Oleo and Gas and is the company's
chairman. In February, the company presented a plan to a Rio de
Janeiro judge to restructure and cede control to creditors owed
$5.8 billion. The company made Latin America's largest-ever
bankruptcy-protection filing in October.
The CVM had decided to give Batista until May 14 to defend
himself against allegations of insider trading and price
manipulation, the government's official gazette said on Tuesday.
The Valor article said Batista and OGX executives had
suspected the amount of recoverable oil in the fields was
smaller than initially expected since 2011.
In September of 2012, board members were presented with a
study by a Brazilian unit of Schlumberger NV, the
world's largest oilfield service company, that confirmed
drilling those areas would not yield a profit under any
scenario, Valor said.
At the time, Batista explained his 2012 share sales as
minor transactions to meet financial obligations he had with
(Reporting by Jeb Blount and Juliana Schicariol; Additional
reporting by Caroline Stauffer and Marcela Ayres in São Paulo;
Editing by Steve Orlofsky, Guillermo Parra-Bernal and Bernard