Brazil’s central bank took over the management of Cruzeiro do Sul SA, the payroll lender downgraded by Moody’s Investors Service in March. According to a statement by the CB, Cruzeiro do Sul “violated financial-system rules” and a central-bank review found insufficient assets – that’s the elegant way that the Brazilian government has found to sugar coat what we call white collar fraud and crime. News site Estadao reported yesterday that central bank identified R$1.3 billion (US$636 million) in losses at Cruzeiro do Sul, but many also say that the losses can be larger. It was also reported recently that the Federal Police will look into the bank’s affairs.
Owners’ background …
The entrepreneurial spirit of the bank founder Luis Felippe was passed early on to the firm’s culture and translated into full ownership: together, he and his son Luis Octavio hold together about 80% of the shares. Now, at 48, Luis Octavio Indio da Costa (the son), who was the Chairman and CEO until days ago, was ousted from his role by the Central Bank after the discovery of a R$1.3 billion hidden loss in the bank accounts. Consider that less than a year ago, Luis Octavio Indio da Costa presented the bank at a 2011 hedge fund conference as the bank was riding high: its net income had grown 13.8% between Q2 2010 and Q2 2011 and the bank’s traded shares had then appreciated over 30% in 12 months. What a sudden change of heart …
While most other Brazilian bankers preferred to spend their fortunes with discretion, the whole country knows that Indio da Costa was always seen attending celebrity events and photographed by social columnists. His “pop off” lifestyle has always been criticized by competitors, which consider his behavior harmful to the conservative image that the profession required. He always drew particular attention to his long list of girlfriends, including former model Daniela Cicarelli.
In 2009, to celebrate the 15th anniversary of his now almost bankrupt bank (founded in 1994), Indio made sure to invest hugely in an event that would make any celebration seem like a neighborhood party. To celebrate the date, Indio da Costa brought singer Elton John and the Italian maestro Ennio Morricone to play at his event. As if it wasn’t enough for a party, months later he also brought to Brazil the legendary singer Tony Bennett for a private concert to 450 guests at his own home in a Sao Paulo suburb.
Indio da Costa also said in an interview that he was considering bringing Barbra Streisand to sing at his next corporate event (obviously, it won’t happen any time soon). Luis Octavio was so much into the celebrity world that the larger-than-life banker asked to meet Madonna in an event and, after talking to her, decided to donate R$1.8 million to a social cause sponsored by the pop star.
Sweet way to burn shareholder money… one can only imagine when did he have time to manage his bank finances.
Sources: Brasil247, Valor, Estadao