LISBON (Reuters) - Banco Espirito Santo’s former finance director is suing the Bank of Portugal and KPMG, demanding they pay the state 4.3 billion euros ($4.9 billion) for allegedly falsifying its accounts before the bank’s 2014 collapse.
Amilcar Morais Pires filed the lawsuit at the Lisbon Administrative Court on Friday, alleging in papers seen by Reuters that the central bank and KPMG “imposed inflated losses,” on Banco Espirito Santo (BES).
The Bank of Portugal and KPMG both declined to comment on the action by Morais Pires in which he alleges that the central bank and the auditor of BES had recognized “excessive provisions and inexistent losses” which led to the failure of BES.
Various lawsuits by BES bondholders and depositors have challenged the way the central bank’s forced “resolution” imposed losses on them, but the new case is the first to allege the regulator and BES auditors deliberately triggered the collapse, which was Portugal’s largest bank failure.
BES folded in 2014 under a mountain of debts accumulated by its founding Espirito Santo family, forcing the central bank to launch a 4.9 billion euro rescue.
Its healthy operations were carved out to form Novo Banco, which is now owned by U.S. private equity firm Lone Star, while the bad debts are being wound down.
Morais Pires himself is under investigation over the sale by BES of debts issued by the Espirito Santo family to BES bank clients before the collapse. He has not been formally accused and his lawyers say he is not guilty.
His lawsuit alleges that the central bank and KPMG knew for several years about the relationship between BES and the holding companies of the Espirito Santo family, which had massive debts.
“This explains the exaggerated reaction by both against BES ... when they perceived that they could be accused of having been too complacent with BES and its leader, (CEO) Ricardo Salgado,” the lawsuit said.
Salgado has been named as a formal suspect on suspicion of fraud, tax evasion and corruption, charges which he denies.
When the central bank intervened in BES in August 2014 it said the cause was a six-monthly loss of 3.57 billion euros that reflected higher exposure to the debts of the family holding company, violating central bank orders.
That forced BES to raise provisions, lowering its capital ratio below the legally required minimum, the lawsuit alleges.
These provisions were annulled “within less than a year, confirming the illegality of creating them” it adds.
Writing by Axel Bugge, editing by Andrei Khalip and Alexander Smith