Exclusive: Brazil
prosecutor investigates funds' investment in Trump Hotel
Rio
Send a link to a friend
[November 02, 2016]
By Anthony Boadle and Stephen Eisenhammer
BRASILIA
(Reuters) - A Brazilian prosecutor has opened a criminal investigation
into investments made by two state pension funds in a luxury Rio de
Janeiro hotel that is part of the Trump franchise, according to a court
filing reviewed by Reuters on Tuesday.
The 130 million reais ($40 million) investment by the two small funds in
the hotel's developer "required investigation" due to its size,
structure and high level of risk, Anselmo Lopes, a federal prosecutor in
Brasilia, said in the document dated Oct. 21 that opened the inquiry.
Lopes said the pension fund for state IT firm Serpro and the Igeprev
fund for employees of Tocantins state invested the money in the
developer, LSH Barra Empreendimentos Imobiliários SA, which built the
Trump Hotel Rio de Janeiro.
"Investing amounts of such size, for these (relatively small) pension
funds, breaks principles for diversification and liquidity," Lopes said
in the document.
"It is necessary to verify if the favoritism shown by the pension funds
towards LSH Barra Empreendimentos Imobiliários SA and The Trump
Organization was due to illicit payments and bribes," Lopes said in the
15-page document.
![](http://archives.lincolndailynews.com/2016/Nov/02/images/ads/current/napa_bch1-3108.png)
The investigation is part of a wider probe into fraud at Brazilian state
pension funds in which bribes were allegedly paid to secure investments.
The Trump Organization and LSH Barra Empreendimentos Imobiliários SA,
the sole owner of the hotel, denied any wrongdoing. Serpros did not
respond to requests for comment.
The Trump Hotel Rio de Janeiro, a beachfront property with 170 rooms
near where the Olympic Park was located, is managed by the real estate
company of Republican presidential candidate Donald Trump, although no
money from the Trump Organization was invested in the project.
Prosecutor Lopes last week also said the Trump Organization may have
benefited "suspiciously" from a massive redevelopment of Rio de
Janeiro's port, where it plans to build a series of office towers. Lopes
provided no proof of his suspicions, and did not elaborate on what he
meant.
The Trump Organization said it had not been informed of either
investigation and said all their business dealings had strictly complied
with Brazilian law.
"We have no relationship or involvement with these pension funds," said
Alan Garten, executive vice president and general counsel at The Trump
Organization. "We have an arm's length agreement with the developer
where we were hired to provide a service.
"In time, I think the investigator will realize that these types of
things wouldn't involve us and don't involve us," he added.
Garten said the Trump Organization performs extensive due diligence on
all its deals using an external firm, which he declined to name.
[to top of second column] |
![](../images/110216PICS/busine1.jpg)
Republican presidential nominee Donald Trump attends a campaign
roundtable with small business leaders in Altoona, Wisconsin, U.S.
November 1, 2016. REUTERS/Carlo Allegri
![](../images/ads/current/demay_inv-lda081412.png)
LEGITIMATE VENTURE
LSH Barra Empreendimentos Imobiliários said in a statement the
unfinished project was a legitimate venture valued at between 250
million reais ($78 million) and 320 million reais ($100 million) that
would render a return on investment.
LSH said the stakes held by the pension funds were in line with
Brazilian law and that it was ready to help prosecutors with their
investigation.
"We regret being connected to acts and procedures that we know nothing
about and never participated in," the statement said.
In the court filing, Lopes said the Igeprev pension fund's 54 million
real investment in LSH Barra was "highly suspicious" because the fund
also bought debt linked to the developer, effectively doubling its
exposure to the project.
Jacques Silva, who took over as head of Igeprev after the investments
were made, agreed the investment was "suspicious" and said his fund was
at risk of losing 1 billion reais due to bad deals struck by the
previous management, of which the Trump Hotel was not the worst.
Reuters was not able to independently verify Silva's allegations. It was
not immediately possible to contact members of Igeprev's previous
management team.
![](http://archives.lincolndailynews.com/2016/Nov/02/images/ads/current/pestcontrol_bch_termites.png)
Plans to build the hotel were announced in 2014, and it was meant to be
ready in time for the Olympics held in August. Delays meant the hotel
was only partially open during the Games, however, with less than half
of its rooms available.
Silva said the luxury hotel had not been a good deal for his fund
because it is a risky long-term investment with no dividends.
"I hope the police and prosecutors get to the bottom of it. ... It's
public workers' money," Silva said.
(Reporting by Anthony Boadle and Stephen Eisenhammer; Editing by Leslie
Adler)
[© 2016 Thomson Reuters. All rights
reserved.] Copyright 2016 Reuters. All rights reserved. This material may not be published,
broadcast, rewritten or redistributed. |