Brazilian businesspeople are not easily shocked. In the past decade they have seen two business empires collapse in ignominy. Eike Batista, for a time Brazil’s richest man, lost his ports-to-mines group amid charges of bribery and market manipulation (for which he was briefly jailed). Marcelo Odebrecht, the scion of a construction dynasty, went to prison over the “Big Oily” graft scheme centred on Petrobras, the state oil giant.
The latest scandal erupted on January 11th, when the new boss of Americanas, Sergio Rial, reported “accounting inconsistencies” that had allowed the 94-year old retail giant to hide 20bn reais ($4bn) of debt over a decade. Correcting the error swelled the firm’s debt to 43bn reais. Its shares lost 94% of their value. On January 19th it filed for bankruptcy. Mr Rial quit; his predecessor, who had run the firm for 20 years, is apparently nowhere to be found. Several creditors cried fraud.
Though modest next to the Odebrecht and Batista imbroglios, the episode struck a nerve. That is because 31% of Americanas is owned by three heroes of Brazil Inc. Jorge Paulo Lemann, Carlos Alberto Sicupira and Marcel Telles gained fame after 3G Capital, the private-equity firm they founded in 2004, sealed deals to win control of global behemoths including AB InBev, the world’s biggest brewer; Kraft Heinz, one of its biggest food producers; and Restaurant Brands International, owner of, among other chains, Burger King. Their “3G way”, which combined Walmart-like ruthless cost-cutting, GE’s “rank and yank” approach to personnel and Goldman Sachs-style performance-based pay, was admired and aped the world over. Their preference for quiet philanthropy over Batista-like flamboyance added to the mythos.
Now aggrieved Americanas lenders, including BTG Pactual,…
2023-02-09 09:25:10 Alleged fraud at a Brazilian retailer sparks a corporate reckoning
Original from www.economist.com
On Tuesday, a prominent Brazilian retailer, who has been at the center of a major fraud scandal, announced it will be closing its doors permanently. The allegations, which involve misappropriation of funds and purposeful fraudulent practices, have rocked the retail industry in Brazil, prompting a corporate reckoning of how financial misconduct is handled within the business world.
The Brazilian retailer, which has not yet been identified publicly, allegedly misappropriated hundreds of millions of dollars from their clients in the form of cash, credit and gift cards. The company’s primary focus was on foreign travelers and provided a service to help tourists convert their currencies at low rates. In return for these services, the retailer asked for a portion of travelers’ funds as commission and pocketed that money for its own use.
This scandal has brought attention to wider issues of fraud in Brazil’s retail industry, with companies such as Enet, one of the largest credit processing companies in the country, coming under intense scrutiny after a financial watchdog found evidence that their practices were fraudulent.
The fallout from the scandal has been felt by other Brazilian retailers, who have adopted a more rigid system of controls to prevent the misappropriation of funds. Companies such as Credit Suisse, HSBC and Itaú have all reviewed their financial practices to avoid similar scenarios wherever possible.
Meanwhile, Brazilian authorities are pressing charges against those responsible for the misappropriation of funds. These charges are a harsh reminder that fraud and financial misconduct in business will not be tolerated by the Brazilian government.
The closure of the retailer at the center of the scandal is a stark reminder of the consequences of financial misconduct for any business, regardless of its size. By introducing tighter security benchmarks, Brazilian retailers are now taking a proactive stance in curbing any fraudulent activity and improving corporate transparency. As the corporate reckoning triggered by the fraud scandal continues to unfold, one thing remains certain: there is no place in the Brazilian business world for financial misconduct.
