Crédit Agricole and Its Insurer Take Ricardo Salgado, Morais Pires and Rioforte to a Lisbon Court for Just Over a Billion Euros

Two civil actions filed at the Tribunal Judicial da Comarca de Lisboa (Lisbon District Court) in July were distributed on Monday to the Juízo Central Cível de Lisboa (Lisbon Central Civil Court), and between them they ask Ricardo Salgado, Amílcar Morais Pires and Rioforte Investments for just over a billion euros. The claimants are Crédit Agricole and Predica, its life insurance arm. The bank is asking 855 million euros. The insurer is asking 152.8 million.

Both are processos comuns (ordinary civil actions), which is to say claims in civil liability for damages rather than anything criminal. They were visible on Citius, the public register of Portuguese court filings. Neither the French group nor Salgado's lawyers would comment when asked.

The partner that helped buy the bank back

The identity of the claimant is the point. Crédit Agricole was not a passing investor in Banco Espírito Santo. It was one of the allies that helped the Espírito Santo family regain control of the bank in the early 1990s, after the 1975 nationalisation had taken it away from them. At its peak the French bank held more than 20 percent, through Bespar, the holding company that bound the two sides together and controlled more than 35 percent of BES.

By 2014 the structure was still in place: Crédit Agricole held 16.7 percent of Bespar, Predica close to 10 percent of it, and the bank a further 10.8 percent of BES directly, for roughly 20.1 percent of the Portuguese lender between direct and indirect positions.

Then the partnership came apart. As the crisis inside Grupo Espírito Santo became visible, Bespar was wound up and each side took its stake directly. BES raised 1,045 million euros of new capital that June; the French subscribed 10 million of it, and their holding was diluted to under 15 percent. On 4 August 2014 the Bank of Portugal applied a resolution measure to BES. The shareholders, the French among them, lost everything.

A different track from the criminal courts

Salgado was BES's chief executive and Morais Pires its chief financial officer. Rioforte Investments grouped the non-financial businesses of Grupo Espírito Santo. All three are named in both actions.

What makes the timing notable is where the criminal side has ended up. In July a Lisbon court acquitted Salgado and seven others in the Banco do Brasil bribery case, and in June his combined sentence was suspended on grounds of Alzheimer's incapacity, after a forensic assessment found him cognitively unable to comprehend imprisonment. A civil claim for damages runs on a different track, with a different standard of proof and a different remedy. It seeks money from an estate, not a custodial sentence from a defendant.

It also joins a queue. The BES insolvency passed 11 billion euros this spring as unpaid interest compounded, and the Fundo de Resolução (Resolution Fund) has set aside 630 million euros against possible compensation claims from creditors of the bad bank. Twelve years on, the resolution of 4 August 2014 is still generating new litigation faster than it retires old.

What This Means for Expats

• Citius is public and searchable. Portugal's court filing register lists proceedings, parties and the court they land in. It is where corporate disputes surface before they are reported, and anyone can consult it.
• Civil and criminal are separate in Portugal. An acquittal, or a suspended sentence on health grounds, does not extinguish a claim for damages arising from the same events.
• Bank shareholders are last in line in a resolution. The 2014 measure wiped equity holders out while transferring the healthy business elsewhere. That order of losses is the same one written into the EU rules that apply to any bank you hold shares in today.
• Ordinary depositors were never at risk here. The resolution moved deposits into the bridge bank. It was capital, not current accounts, that vanished.

Neither action has been contested yet, and a first-instance civil claim of this size will take years rather than months. What it establishes is that the last of BES's institutional shareholders has decided that twelve years of criminal proceedings will not compensate it, and has gone looking for the money itself.