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EFS Release - Eletrobrás debentures
ELETROBRÁS: A ‘legalized scandal’ proposed as a solution

The confirmation of pending financial amounts owed to minority shareholders in Eletrobrás, as reported in the press (see article "Light at the end of the tunnel ELETROBRÁS" published on January), makes it even more inexplicable that the SEC (Securities and Exchange Commission) upgraded ELETROBRÁS’ ADRs to Level II.

Without a doubt, this is due to the complete lack of adequate supervision by the SEC and independent auditors that had access to both the financial statements and balance sheets of the holding company and its subsidiaries. However, this becomes even more serious when we take into account the fact that all the risk classification agencies (national and international), along with some investment funds, issued Investment Grade ratings for a company that had not paid dividends to its shareholders for more than twenty years, at the same time as it illegally increased the shareholdings of its controlling partners: Banco do Brasil; the BNDES, BNDESPAR, the Caixa Economica Federal and the government, partners that in fact owed the withheld debenture capital used to increase their stakes. The CVM, in this case, can be seen as a puppet in this power play. Prove of these facts can be found in the Independent Auditor’s report (by Sand), which details the operations as well as describing how the debts of these companies were used to increase their shareholdings, in a total involving more than 8.5% of all ordinary and preference shares in the fully-owned subsidiaries with the company’s share capital.

These irregularities are so serious that if they were detected in another more diligent country, many of the representatives involved in these operations would be behind bars and the company itself very possibly barred from trading shares, at least the ADRs on the NYSE, with the lack of SEC diligence, as processes and information were sent to this entity more than six years ago indicating that national and U.S. pension funds were victims of this scandal, including the pension fund for important judges in the U.S. The financial volume of liabilities involved totals more than US$25 billion in terms of increases in share capital and withheld dividends, and an attempt has even been made to hide these actions with a Provisional Measure (479), which then became Law 11,941/09, which apparently for most of the unaware population, creditors and investors, is a law dealing with the payment of tax debt in installments, commonly referred to as REFIS DA CRISE. And this is an issue that has little to do with the engineering of share capital the appropriation of loan reserves and capital for dividend payments (among other liabilities) to irregularly increase the number of shares held by half a dozen controlling shareholders by the hub of power that includes the CVM.

As serious and significant the aforementioned irregularities are, we believe that if the headquarters of this company was in a more diligent country, the directors would likely be behind bars and the company quite possibly barred from trading, at least on the NYSE, an institution that suffers from a distinct lack of oversight by the SEC, where processes involving this issue were filed more than six years ago, and that clearly show the victims of this fraud (and which are apparently still being analyzed). Unfortunately, these include major investment funds and pension funds from the U.S., including the pension funds of judges from important U.S. States.

Dr. Édison Freitas de Siqueira

 


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