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Espírito Santo's Miami Bank in Talks to Be Bought by Benacerraf Family
Updated March 17, 2015 8:05 a.m. ET
LONDON—Espírito Santo Bank, the Miami arm of the collapsed Espírito Santo empire, is in advanced negotiations to be bought by Venezuela’s Benacerraf banking family, according to people familiar with the planned purchase.
The one-branch Florida bank was put up for sale in August after Portuguese owner Banco Espírito Santo failed. It has around $ 660 million in assets and a securities arm catering to customers in Venezuela and Brazil. For nearly four decades, it held a key role in raising funding from wealthy Latin American clients for the Espírito Santo group.
Under the terms of the proposed deal, the Benacerraf family would pay $ 10 million in cash and inject up to $ 15 million in additional capital to stabilize Espírito Santo Bank after months of turmoil.
The negotiations with the Benacerrafs have been under way for months but hit delays including a rival offer, multiple regulatory investigations and lawsuits at the bank, the people said.
An Espírito Santo Bank spokeswoman declined to comment. A Benacerraf family representative didn’t respond to requests for comment.
Among the hurdles for a sale were continuing investigations into Espírito Santo Bank’s anti-money-laundering controls and alleged breaches of the U.S. Bank Secrecy Act, focused around transactions with clients of a Panama affiliate that were previously reported by The Wall Street Journal. The Miami bank was issued with a consent order by the Federal Deposit Insurance Corporation last month to strengthen its controls, people familiar with the order said.
A spokeswoman for the FDIC declined to comment.
The Bank of Portugal is also considering a rival offer for Espírito Santo Bank from an investor group, people familiar with the matter said. But that bid is seen as less likely to receive U.S. regulatory approval and involves breaking up the bank, the people said.
Two weeks ago, Benacerraf family representatives met in Miami with Luis Maximo dos Santos, chairman of the “bad bank” that owns Espírito Santo Bank, people familiar with the meeting said. The Bank of Portugal in August moved most of Banco Espírito Santo’s assets into a “good bank” called Novo Bancothat is up for sale. The bad bank’s assets are being liquidated. A representative for Banco Espírito Santo declined to comment.
The Benacerrafs are one of Venezuela’s oldest banking families and were once part-owners of a U.S. bank through a shareholding in Banco Union CA, now part of Venezuelan lender Banesco. The family patriarch, Salomón Henry Benacerraf, was chairman of Visa International between 1987 and 1994, according to filings.
To help facilitate a sale of the Miami arm, which was ordered by the FDIC in August, Espírito Santo has been seeking to settle lawsuits and wrap up the regulatory probes. In December, it agreed to pay $ 8 million to resolve a suit by the liquidator of a bankrupt Brazilian bank over alleged money laundering.
The regulatory investigations came after Espírito Santo Bank self-reported a series of transactions with Panama’s E.S. Bank to the U.S.-based Financial Industry Regulatory Authority, or Finra, late in 2013, prompting a multi-agency investigation by the FDIC, the U.S. Securities and Exchange Commission and other federal and state banking regulators. Panama’s banking regulator, which took over E.S. Bank in July, couldn’t immediately be reached. The regulator didn’t respond to previous requests for comment on the U.S. probe.
The transactions involved direct dealings with customers of the Panama bank, a correspondent bank of Espírito Santo Bank. A former top executive and board director at Espírito Santo Bank, Jorge Espírito Santo, was also chairman of E.S. Bank Panama. Mr. Espírito Santo, a Portuguese national whose close family members controlled the Espírito Santo group, was fired by Espírito Santo Bank last year and moved back to Portugal. He couldn’t be located for comment. In an Aug. 6 letter in which he resigned from the Espírito Santo Bank board, he said that he had been used as a scapegoat for other, unnamed people within the bank. A bank spokeswoman at the time dismissed that explanation.
New York and Texas prosecutors are also studying Espírito Santo Bank’s dealings with a Venezuelan businessman who held multiple accounts at the bank, according to people familiar with the matter.
In 2013, employees of the Miami bank noticed that funds coming into the businessman’s accounts from Venezuela’s public-housing agency were being transferred to accounts in the Cayman Islands and Switzerland, according to former bank officials. The bank closed the accounts and told regulators that the transactions appeared suspicious, the officials said.
The scrutiny comes as U.S. authorities step up pressure on Venezuela over alleged corruption by its public officials, among other alleged violations. In a separate action, the U.S. Treasury’s Financial Crimes Enforcement Network last week alleged that an Andorran bank, Banca Privada d’Andorra, and its managers had helped a money-laundering network involving high-ranking Venezuela government officials to siphon funds from state oil giant Petroleo de Venezuela SA. BPA, which is now under the control of Andorran authorities, said last week that it “has worked and is working with the Andorran financial regulator to uncover any wrongdoing.” PdVSA couldn’t be reached for comment.
Meanwhile, prosecutors in Portugal, Switzerland and Luxembourg have said that they are investigating parts of the Espírito Santo group, and Portugal is conducting a parliamentary inquiry that saw executives, regulators and accountants defend their roles in the group’s demise.
—Patricia Kowsmann in Lisbon contributed to this article.
