The head of Brazil’s Securities and Exchange Commission (CVM), João Pedro Nascimento, on Tuesday appeared before a Senate committee and admitted that “oversight relations failed” in the case of retail giant Americanas. The company has entered a highly controversial bankruptcy protection program after reporting “accounting inconsistencies” of BRL 20 billion (USD 3.8 billion) and liabilities of BRL 43 billion.
Mr. Nascimento added that the people responsible for what has been dubbed Brazil’s biggest accounting scandal ever should face “severe punishment.” “A case like this must not be able to happen,” Mr. Nascimento told senators from the Economic Affairs Committee.
After filing for bankruptcy protection in January, Americanas last week unveiled a recovery plan that includes a multi-billion capital injection from the company’s trio of reference shareholders, as well as asset sales and debt-to-equity conversions.
The massive debt was revealed early this year after Sergio Rial, who served as the company’s chief executive for nine days, resigned. Mr. Rial told investors that the Americanas board did not include loans with suppliers as bank debt on its balance sheets.
Banks, Americanas’s largest creditors, classified the accounting error as fraud and started a bitter legal battle against the retailer, which ultimately led the company to file for bankruptcy protection on January 19.
Mr. Rial also attended today’s public hearing. He was grilled by a few lawmakers, most notably pro-Bolsonaro Senator Carlos Portinho, who questioned Mr. Rial’s brief relationship with Americanas.
Senator Portinho presented a contract from May 2022, indicating that Mr. Rial’s relationship with Americanas had begun earlier than previously announced, in September. Mr. Rial confirmed the contract’s authenticity, but argued that it defined compensation for his future job as CEO, which he took over in early January 2023.
Before taking over as the CEO of Americanas for nine days, Mr. Rial was chairman of the board at Santander Brasil, one of the retailer’s biggest creditors.
Mr. Portinho shot back. “The ‘3Gs’ [the billionaires that own the 3G Capital group, Jorge Paulo Lemann, Marcel Herrmann Telles, and Carlos Alberto Sicupira] — I can’t believe they are so silly not to realize a BRL 40 billion loss.”
Mr. Rial insisted that 3G Capital’s founders, who are also the largest stockholders of Americanas, demonstrated “absolute surprise” when they were informed of the accounting error.
Mr. Nascimento agreed with Senator Portinho that there is an “inconsistency” in the information supplied to the CVM about Mr. Rial, and that the May 2022 contract was not supplied by Americanas to the ongoing investigation.
Other lawmakers were blunter. Senator Eduardo Braga said the Americanas scandal is “the biggest case of corporate fraud ever heard of in Brazil.”
Senator Otto Alencar from Bahia questioned the role of auditing firm PwC, which was responsible for scrutinizing Americanas’s books for four years. The company has denied any liability in the case. PwC was invited to today’s Senate hearing, but refused to send a representative. “[PwC] doctored the accounting,” Mr. Alencar said. “It was an auditing job made by a criminal company.”
Senators of the Workers’ Party did not ask questions during the hearing. In January, Americanas hired attorney Cristiano Zanin, who is also an attorney for President Luiz Inácio Lula da Silva and rumored to be his pick for an upcoming Supreme Court position.
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