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G-Men Swarm the Bovespa!

DATELINE: SAMBODIA — Yesterday’s Valor Econômico carried a special section on law enforcement cooperation and financial crimes investigation training provided by the SEC and FBI to Brazilian federal police and the native securities regulator, the CVM.

The key analysis is translated from an article by Jonathan Weil of Bloomberg, who excoriates the PCAOB as a do-nothing enforcer of accounting standards.

The coverage was neither substantial nor all that newsworthy, given that the previous federal government had worked out an accelerated cooperation program in the wake of a series of cases in which Brazilian and U.S. authorities cooperated in multijurisdictional cases, financial in nature and otherwise.

Today, Relatório Reservado — my beloved carioca tip sheet, which admittedly sometimes makes up for in eloquence what it lacks in substance — follows up. This, says the Relatório, is not necessarily a drill.

The shock troop of 150 agents dug in inside the CVM has other, less transparent, reasons for its visit. They are here to look into suspicions that are being treated as a matter of state policy by the U.S. government: the supposed promiscuity between the Brazilian government and some of the major listed companies on the Bovespa — The São Paulo State Stock Exchange — both in Brazil and in New York.

The matter is the subject of three SEC investigations — Nos. 676.5600.200, 207.648.894.3 and 323.950.536 — and one from NYSE’s regulatory arm, Case 676.590.196.

Let me see if I can find those documents. They do not exactly pop right out at you in a search of the SEC Web site, but then again, this is the SEC Web site we are talking about.

The FBI is also looking into the charges.

The North Americans have come to the conclusion that the Bovespa lacks transparency and reliability when it comes to regulatory disclosure by listed companies, and is not in compliance with international rules in these areas.

Hell, you need not be a forensic accountant to reach that conclusion. But the dance of converging accounting standards is a slow and complex one.

… statistics provided by the Americans show that nearly 90% of the M&A deals closed in the last decade involved at least one of the three largest pension funds for federak civil servants — Previ, Petros and Funcef — or else investment funds specializing in the shares of Banco do Brasil’s investment funds or BNDESPar, the investment arm of the state-owned BNDES. Taken altogether, these institutions manage some US$ 600 billion.

The higher profile of Brazilian ADRs on the NYSE-Euronext also drives concern about state interventionism in this big-ticket firms, according to our carioca friend.

Our reporter says our gringo feds are not happy about the active role taken in large, expansive companies like JBS Friboi, Embraer, Embratel, and Brasil Foods — all of them in fourth-gear deal-making mode with subsidies from BNDES or the more indirect action of CALPERS-sized trade-union pension funds with close ties to a trade-unionist government.

We gringos are said to be alarmed, for example, by the ousting of Roger Agnelli from Vale do Rio Doce, apparently as a result of political considerations.

In a word, according to our man in Rio, our G-men are said to suspect the Brazilian federal government of directly manipulating stocks held by U.S. investors. This sounds a bit more like a talking point for trade talks than a subject for a roundtable on finding and seizing Bolivian drug money, however.  Continue reading


Daniel in the Lion’s Den: Deciphering the Dantas Drives

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PRETTY DAMN GOOD PRIVACY. PGP on a BlackBerry gizmo. Source: Sorry, I forgot to note it down.

FBI ajudará Brasil a abrir arquivos de Dantas: The United States Federal Bureau of Investigation will help the Brazilian federal police decrypt five hard drives apprehended at the Rio de Janeiro apartment of banker Daniel Dantas, recently convicted of bribery of a federal police agent here.

So Último Segundo reports (at second hand.)

The banker is free pending appeal. He also faces charges of money laundering, tax evasion, and financial (accounting) fraud. Or the local equivalents. I am not a lawyer.

Dantas also faces a separate case, dating back to 2004, of industrial espionage. He and a former Kroll executive, and I think some crazy ex-Israeli military guy, too, allegedly bugged government officials, Dantas’ business partners in Brasil Telecom, and journalists who covered him negatively.

Prosecution of that case was set back recently, however, with a ruling by a federal court that it does not have jurisdiction over the spying case.

The Brazilian federal tax authority is nicknamed “the lion.” Nobody anywhere likes the tax man much, do they?

BRASÍLIA – O Instituto Nacional de Criminalística, em Brasília, jogou a toalha. Cinco meses depois de a Polícia Federal ter apreendido cinco discos rígidos de computador no apartamento do banqueiro Daniel Dantas, o órgão concluiu que não tem condições de quebrar a senha que protege os arquivos ali guardados. Vai pedir ajuda ao FBI, a polícia federal dos EUA. As informações são do jornal “Folha de S. Paulo”.

The Brazilian National Criminalistics Lab (INC) in Brasilia has thrown in the towel. Five months after the federal police apprehended five computer hard drives from the apartment of banker Daniel Dantas, the agency has concluded it does not have the capability to crack the password that protects the files stored thereon. It will ask help from the American federal police. The report is from the Folha de S. Paulo.

Continue reading