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EFS Release - Eletrobrás debentures
Brazil – Eletrobrás case proves there still is big trouble in the securities market and state controlled enterprises

The company Centrais Elétricas Brasileiras, also known as Eletrobrás, still resists paying billions of dollars in unpaid dividends to its minority shareholders and to acknowledge the reimbursement of billions of dollars in capital reserves that have been illegally appropriated by its controller partner since 1970.

These illegal appropriation has been done in order to increase the Eletrobrás controller partner’s capital payment and its share in the company. This controller partner has systematically benefited only 6 shareholders among the thousands of other Eletrobrás shareholders.

This practice hides fraudulent management practices that contaminate (like a pest) other Brazilian institutions such as: the Petrobrás Group and the 34 Major Pensions Funds in Latin America, which have their directors named by the controller partner of Eletrobrás.

All these irregularities are not solved due to the fact that the state organ that should oversee the Brazilian corporations and their activities has its directors nominated by the same people who control the Group Eletrobrás.

Bloomberg.com published an article concerning the Eletrobrás case, see it below.

By Francisco Marcelino and Adriana Brasileiro, from Bloomberg.com

Centrais Eletricas Brasileiras SA, Latin America’s largest utility, is delaying a 10 billion real ($5.3 billion) dividend as it negotiates timing of the payment with Brazil’s government, its biggest shareholder.

The Rio de Janeiro-based company held back the dividends, which date as far back as the 1970s, to invest in projects such as the construction of the Itaipu hydroelectric dam along the border with Paraguay. Each voting share is expected to receive 10 reais in dividends.

“To pay all the dividends, we still need money from the government,” Chief Financial Officer Astrogildo Quental said in an Aug. 14 interview from Rio de Janeiro. “We’re in talks with the Treasury to find a solution.”

The delay underscores the risks for shareholders in state- run companies, said Edison Garcia, superintendent of Brazil’s Minority Shareholders Association, which represents investors with about 300 billion reais in assets. Nine of the 58 companies in the Bovespa stock index are controlled by the federal or local governments. Among them are Petroleo Brasileiro SA, Cia. Energetica de Minas Gerais and Banco do Brasil SA.

“This situation creates an environment of legal doubt for people investing in Brazilian state-controlled companies,” Garcia said. “The Brazilian Treasury must find a way to pay its obligations.”

Quental may address the dividend issue as early as this week at meetings with investors and analysts after Eletrobras, as the company is known, reports second-quarter earnings. The utility will report results by tomorrow, he said, after an Aug. 13 release was delayed because of operational problems.

Ruling

Eletrobras can’t use its cash to pay dividends before a decision by the government, which owns 80 percent of voting shares, Chief Executive Officer Jose Muniz told reporters in Rio last week. The government is discussing how and when to make the payment as it would count as an expenditure in the budget.

Brazil’s securities regulator, Comissao de Valores Mobiliarios, ruled in 2008 that Eletrobras acted irregularly by not paying investors. The agency, known as CVM, can’t order the company to pay, so it started a separate investigation into the role of company executives in the dividend case.

“We aren’t aware of the ongoing CVM’s investigation,” Quental said. “We don’t plan to pay shareholders because of the CVM ruling. We’ve planned to pay them for a long time,” he said, adding Eletrobras will cooperate with regulators.

Any payment probably would involve a combination of cash and stock, likely altering the size of the stakes owned by the government and minority investors, Muniz said. A Brazilian Treasury spokeswoman in Brasilia declined to comment.

Courts

Minority shareholders probably won’t be paid unless the company is ordered by a court, said Daniel Brazil, a director for the Porto Alegre-based law firm Edison Freitas de Siqueira Advogados, which represents investors claiming about 3 billion reais from Eletrobras, including holders of convertible debt.

“We expect to have a return within a year,” Brazil said.

Eletrobras voting shares fell 1.7 percent to 24.20 reais in Sao Paulo as the benchmark Bovespa stock index dropped 2.5 percent. The shares are little changed this year, lagging a 47 percent gain in the Bovespa. The American depositary receipts have climbed 27 percent. Each ADR represents one ordinary share.

The lack of details on the dividend payment may prevent the stock from rising further, said Rosangela Ribeiro, an analyst at SLW Corretora in Sao Paulo.

“The dividend is a positive driver which has supported the stock, but investors may lose their patience if the company doesn’t say soon how and when it plans to pay,” she said.

Markets

The Bovespa index rose 0.6 percent to 56,638 last week, led by Gol Linhas Aereas Inteligentes SA, which climbed 16 percent, and Rossi Residencial SA, which gained 10 percent. Redecard SA fell the most in the gauge with a 9 percent drop.

The yield on the local-currency zero-coupon bonds due January 2010 fell 8 basis points, or 0.08 percentage point, to 8.651 percent. Brazil’s real declined 1.5 percent to 1.8484 per U.S. dollar.



Below one may read the EFS Release about the biggest financial fraud:

Validity and tradability of the Eletrobrás debentures was acknowledged in the court of law
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PETROBRAS AND PRIMARY SURPLUS: One cannot fix decades of accounting fraud without saying who made the fraud
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ELETROBRAS, POLEMIC CONTINUES AT THE SUPERIOR COURT OF JUSTICE (STJ) - THE WORLD BANK HAD WARNED!
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Eletrobrás wants to put an end to the long story on dividends
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ELETROBRÁS – Authorities in Brazil and the USA turn a blind eye to the Brazilian Power Giant 20 billion dollar fraud in the securities market
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REDESIGNING ELETROBRÁS
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Eletrobras plans to invest R$ 30.2 bi (USD 14.6 billion) until 2012
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The greatest conflict of interest in the brazilian securities market.
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Glossary of concepts and terms discussed in the article - Opinion about the world crisis.
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Flowchart showing the interlocking of power of more than US$ 350 billion
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Auditing firm finds fraud at ELETROBRAS
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International Frauds: Madoff case x Eletrobrás Brazil
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MADOFF Scandal, a little portrait of the fraud in the international stock market and financial system
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The billionaire Eletrobras case - World Bank's “ROSC” report and the press
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Court of Law in the State of Rio de Janeiro is exception to the World Bank`s Report
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