The previous management team at Brazilian retailer Americanas SA carried out fraudulent accounting practices and hid them from investors and the board of directors, according to a filing on Tuesday and comments from the current chief executive officer.
The former executive team, led by then Chief Executive Officer Miguel Gutierrez, created false advertising contracts as a way to reduce costs on the balance sheet that ballooned to 21.7 billion reais ($4.5 billion) as of Sept. 30 2022, according to the filing that was based on information from an independent investigation. In addition, part of the money was shifted into suppliers accounts to cover the hole, the findings show.
Hours later, Leonardo Coelho, the current CEO, presented slides during a congressional hearing that allegedly show how the former executive team kept the real financial figures from the board, falsified letters and signatures and asked banks to remove references to supply chain financing operations. They also tried to sway the opinions of auditors, he said.
Gustavo Minas/Photographer: Gustavo Minas/Bloo
“The material fact today is that Americanas, for the first time, no longer calls this crisis ‘accounting inconsistencies”‘, Coelho said. “It calls it ‘fraud.'”
The details are the clearest sign yet of what happened at the Rio de Janeiro-based retailer that was sunk into crisis in January after the incoming CEO Sergio Rial unveiled a massive accounting error that doubled its liabilities and forced it into bankruptcy protection to fend off creditors. The largest shareholders at Americanas, the trio of billionaire founders of buyout firm 3G Capital Inc., Jorge Paulo Lemann, Marcel Telles and Carlos Sicupira, have insisted that they were unaware of any fraudulent activity at the firm.
Shares jumped as much as 19% in Sao Paulo before paring to trade around 1.24 reais a piece. Americanas dollar bonds last exchanged hands at 16.75 cents on the dollar, according to Trace pricing.
In addition to the advertising contracts to hide losses, the executive team signed new financing agreements without the needed approval, the report says. Those included some 18.4 billion reais of supply-chain financing operations known as “forfait” or “risco sacado” in Portuguese and 2.2 billion reais of working capital financing operations.
Along with Gutierrez, former executives Anna Christina Ramos Saicali, Jose Timotheo de Barros, Marcio Cruz Meirelles, Fabio da Silva Abrate, Flavia Carneiro and Marcelo da Silva Nunes were named in the findings as being aware and participating in the irregular accounting activities.
Coelho showed slides of WhatsApp messages that he said were exchanged between the executives on their efforts to hide information and alter documents in which they claimed it would be “sudden death” if they were caught.
In others, they discuss how to keep debt leverage levels lower and exchange “internal views” of balance sheets and ones meant for the “board’s view.” In 2021, the internal document showed a negative Ebitda of 733 million reais while the board version had a positive 2.9 billion reais, Coelho said.
Rio-based law firm Vieira Rezende, which is believed to represent Gutierrez, didn’t answer phone calls and emails. The other directors didn’t immediately return messages or weren’t reachable for comment.
The former executives plan to go to the courts to argue that the board of directors was aware of the accounting practices, O Globo reported.
The probe on what happened at Americanas continues at the company’s independent committee, the securities regulator, federal police and at Congress.
The company’s top shareholders continue to negotiate a debt restructuring agreement with creditors that could see them agree to a lock-up of at least three years where they’d agree to not sell any shares as part of the recovery efforts at the century-old firm.
— With assistance from Beatriz Reis
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