By Jeannette Neumann And David Enrich
A Swiss financial company embroiled in the Espírito Santo saga
is in the process of largely shutting down, according to people
familiar with the matter.
The Lausanne-based company, Eurofin Holding SA, is selling or
spinning off businesses and winding down asset portfolios, these
people said. It is possible that parts of the company will emerge
in some form under a different name, one person said.
The news comes as Portuguese regulators publicly announced that
they are investigating Eurofin for discreetly helping Banco
Espírito Santo SA raise money as the lender headed toward collapse
earlier this year.
A parliamentary committee in Lisbon has been questioning
Portuguese regulators about the August bailout of Banco Espírito
Santo, following allegations of fraud and accounting problems. The
hearings are expected to last months, as lawmakers seek to unravel
what triggered the disintegration of what was once Portugal's
biggest lender by market value.
On Monday, Bank of Portugal Governor Carlos Costa told lawmakers
that regulators had uncovered "evidence that suggests acts of
deceit and ruinous management regarding the issuance and placement
of Banco Espírito Santo debt in special-purpose vehicles based
abroad through various movements made via a Swiss
intermediary."
That intermediary is Eurofin, according to a person familiar
with the matter.
In a front-page story in August, The Wall Street Journal
reported that Eurofin appeared to have played a central role
propping up the Espírito Santo conglomerate over the years. The
Journal reported last month that regulators are looking at Eurofin
having helped Banco Espírito Santo issue bonds at one price and
then sell them to customers at a higher price.
Eurofin said at the time that it is wholly independent from
Espírito Santo and that it didn't sell financial products to the
bank's customers.
Eurofin, founded 15 years ago largely to handle Espírito Santo's
financial transactions, was for years partly owned by Espírito
Santo. It derived a substantial portion of its revenue from the
Portuguese conglomerate and its top executives frequently traveled
to Lisbon to meet with Espírito Santo leaders.
Eurofin, which shares its Lausanne headquarters building with a
pole-dancing school, has encountered severe financial problems as
the Espírito Santo empire disintegrated. The small company has
dismissed dozens of employees. It recently has sold or spun off its
private-equity and medical units, according to a person familiar
with the matter. Other parts of the company are slowly being shut,
this person said.
Eurofin Securities SA, a key business unit, filed for bankruptcy
in September, according to a company filing.
On Tuesday, Carlos Tavares, head of Portugal's securities
regulator, said the Espírito Santo bonds sold to customers were two
to three times higher than the initial price.
"This price difference was kept by the counterparties that we
have not fully identified," Mr. Tavares said. According to
information obtained by the auditors, "the difference was used to
repay debts of other Espírito Santo Group entities," he said.
The sale of those bonds happened mainly in the first half of
this year, he added.
"We don't think Eurofin is a counterparty to Banco Espírito
Santo," Mr. Tavares said. "We suspect that it is an entity related
to Banco Espírito Santo, although not formally. We have that
suspicion, but we don't have the full information on that
matter."
Separately, Mr. Tavares said Portuguese regulators are
investigating potential insider trading on July 31 and Aug. 1, days
before Banco Espírito Santo was bailed out. Mr. Tavares said
regulators are awaiting additional information from a "foreign
entity" to further advance the investigation.
Mr. Costa, the Bank of Portugal governor, said Monday that
binding offers for Novo Banco SA, the "good bank" carved out from
the collapsed Banco Espírito Santo are due in the middle of the
second quarter next year.
Bankers in Spain say one likely bidder is Banco Santander SA,
the eurozone's largest lender by market value. Santander's chief
executive said this month that the bank would look at buying
opportunities in Portugal, where it already owns a lender.
Margot Patrick contributed to this article.
Write to Jeannette Neumann at jeannette.neumann@wsj.com and
David Enrich at david.enrich@wsj.com
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