Shares of Banco BTG Pactual SA fell more than 10% by mid-day Aug. 23 after federal police in Brazil raided the investment bank's headquarters and addresses belonging to founder and former CEO Andre Esteves.
In the latest phase of the so-called Lava Jato corruption probe, police said they executed 12 search and seizure warrants in the cities of São Paulo and Rio de Janeiro to investigate whether state-run oil firm Petrobras sold stakes in African oilfields to BTG Pactual in 2013 for an amount lower than preliminary assessments by other financial institutions.
The police said it was investigating conduct that "may have damaged public coffers by at least US$1.5 billion, which today equates to approximately 6 billion reais."
In a statement of its own, BTG Pactual acknowledged the raids on its headquarters in both cities, denied any wrongdoing, and said it was collaborating with investigators.
According to press reports, Maria das Graças Foster, the former CEO of Petrobras, was also a target of the most recent raids. Police reportedly seized a mobile phone and computers belonging to Esteves, who was arrested in 2015 as part of the same Lava Jato scandal but was cleared of corruption charges in mid-2018.
The shares of Banco BTG Pactual, which is part of the BTG Pactual Group, fell around 11% to below 60 Brazilian reais each in early Sao Paulo trading, but are still up roughly 140% year to date.
In its statement, BTG said the latest police operation centered on allegations that had already been investigated by an independent committee led by law firm Quinn Emanuel Urqhart & Sullivan LLP. According to BTG, the law firm previously concluded "there is no evidence that the accusations of committing illicit acts would be credible, trustworthy of founded in concrete evidence."
Esteves' arrest in 2015 spurred a liquidity crisis at BTG and shook investor confidence in the company. The company has since revamped its business model to make its bottom line less susceptible to volatility. Earlier in 2019, Esteves filed a request with Brazil's central bank to regain control of the investment bank.
As of Aug. 22, US$1 was equivalent to 4.05 Brazilian reais.
