Eike Batista to Face Criminal Charges in Rio for Financial Crimes

10/07/2014 - 08h53

The business magnate Eike Batista will face criminal charges in the Federal Court of Rio de Janeiro, accused of crimes against the capital market relating to the sale of shares of the oil company OGX, in two periods during 2013.

This is just the first of three accusations presented by public prosecutors in Rio and São Paulo. Rodrigo Poerson and Orlando Cunha found evidence of insider trading (negotiation of shares using privileged information, unknown to the public) and market manipulation.

The first of the alleged crimes occurred between May and June of 2013, with shares negotiated worth R$197.2 million (US $81.5 million). Profits from the deal are estimated between R$123.8 million (US $51.2 million) and R$126.3 million (US $52.2 million).

Just days later, OGX went cap in hand to the market to admit that its three main oilfields were not commercially viable, despite having declared the exact opposite only four months beforehand.

Another incident occurred around the end of August and the start of September, when Batista made a deal worth R$111 million (US $45.7 million).

Soon afterwards, he announced he was reneging on a promise to investors to buy $1 billion in OGX shares, made the year before in a bid to retain their confidence.

A Folha report from November 2013 revealed that OGX executives knew as far back as 2012 that the company's production capacity and the size of its reserves were much smaller than initially estimated. However, this information was only officially updated the following year.

Market manipulation carries a maximum eight-year sentence, while Batista could receive five years for insider trading.

The Rio Public Prosecutor's Office also ordered seizure of Batista's assets, in order to pay possible compensation for damage to the market estimated at R$1 billion (US $413 million). On September 17, Judge Souza froze Batista's accounts, denying him access to R$117 million (US $48.2 million).

THE OTHER SIDE

In an interview with Folha on September 18, Batista said he sold the shares before the publication of negative information regarding the company because they "belonged to creditors".

"The shares weren't mine. They belonged to creditors. They were in my name, but I didn't own them,' Batista said. 'I was trying to sort out an enormous debt, in part to prevent a collateral effect on the rest of the group."

Folha tried to contact Batista's lawyer, Sérgio Bermudes, but so far without success.

Translated by TOM GATEHOUSE

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