A Judge Says Two of Brazil’s Biggest Banks Helped Hide Americanas Debt

Business

Key Facts

—The finding. A federal judge in Rio de Janeiro, Giovana Calmon, saw indications that Itaú and Santander possibly acted in a coordinated way to conceal financial operations carried out by Americanas.

—The denial. Itaú says it is not the object of the investigation, that it refused requests to alter the documents at issue, and that each institution acted alone.

—The mechanism. Banks confirm a client’s debts to its auditors in a document called a circularisation letter, and investigators say supplier-finance debts were left out of them.

—The scale. A court has frozen assets of those under investigation up to R$54bn ($10.49bn), against the R$25.3bn ($4.91bn) hole the company declared in 2023.

—The third bank. An executive of Bradesco was also among the nine targets of the June searches, alongside two from Itaú and two from Santander.

—The standard. These are indications, not verdicts. Nobody has been charged, and the asset freeze is precautionary.

The Americanas fraud has produced an unusual public disagreement this week, between a federal judge who recorded indications that two of Brazil’s largest banks worked in concert to hide a retailer’s debts, and one of those banks, which says in flat terms that they did nothing of the kind.

The judge is Giovana Calmon, of the tenth federal criminal court in Rio de Janeiro. Her decision authorised the searches that federal police carried out in late June against executives of Itaú, Santander and Bradesco.

Her reasoning became public this week. She found indications that the banks possibly acted in a coordinated fashion to conceal financial operations carried out by the retailer, and that their executives had been, in the investigators’ phrase, indispensable for the frauds to occur and to persist over time.

How the Americanas fraud was allegedly kept invisible

The mechanism at the centre of the case is dull, which is why it worked for so long. It is called supplier finance, or in Brazil risco sacado.

A retailer buys stock and promises to pay the supplier in ninety days. The supplier prefers cash now, so a bank pays him early at a discount, and the retailer then owes the bank instead.

That obligation is a debt to a bank and belongs in the accounts as one. Americanas, investigators say, recorded it as an ordinary debt to suppliers, which made the company look far less indebted than it was.

Auditors ought to have caught the discrepancy, and there is a routine document designed to let them. A bank issues the company’s auditors a circularisation letter confirming the balances and operations it holds with that client.

According to the police, the supplier-finance operations were omitted from those letters. Had they appeared there and not in the balance sheet, the contradiction would have been obvious to any auditor.

Why the banks are said to have gone along

The investigators’ theory has an uncomfortable logic. The volume of supplier finance kept growing, the banks could see it growing, and nobody asked why it never surfaced in the retailer’s published debt.

Silence had its rewards. The business generated fees, it deepened a relationship with one of Brazil’s largest retailers, and it avoided a quarrel with the billionaires who controlled it.

Without the constant renewal of those credit lines, the police argue, the company’s borrowing would have hit a wall years earlier. The losses to shareholders, creditors and other banks would have been correspondingly smaller.

The investigation reached the banks because a former Americanas finance director, Fábio Abrate, signed a plea agreement with federal prosecutors in 2024. He told them that information about supplier finance was being stripped out of documents connected to the company’s accounts.

The bank’s answer, in its own words

Itaú’s response is worth reading closely, because it does not hedge. In a statement to the Brazilian outlet Metrópoles, the bank said it is not the object of the investigation and has cooperated with the authorities since 2023.

It said the records make clear that it firmly and independently refused requests from the retailer’s former management to alter circularisation letters. It added that its letters followed its own market templates, unrelated to the standards of other banks.

Then came the sentence that answers the judge directly. The documents, Itaú said, prove the absence of any alignment, coordination or arrangement with other financial institutions, and each institution acted in isolation.

Santander says it stands alongside the injured parties and continues to cooperate. Bradesco says it is following the case and remains available to the authorities.

The number that keeps growing

When the scandal broke in January 2023, Americanas declared a hole of about twenty-five billion reais. The court has now frozen assets up to fifty-four billion, the figure technical reports attach to the alleged damage.

On our arithmetic that is slightly more than double the company’s own original disclosure. The freeze is a ceiling and a precaution, not a finding of loss.

Among the nine people searched is Sérgio Rial, who was chief executive of Americanas when the fraud came to light and had previously been president of Santander. On the eleventh of January 2023 he announced his departure and disclosed the accounting inconsistencies in the same filing.

The securities regulator opened two administrative inquiries in January, one of them examining precisely the banks’ role in the supplier-finance operations. The shares now trade near four reais, against twenty-eight at their peak in 2020.

Has anyone been charged over the Americanas fraud?

No, the judge recorded indications, which is a lower standard than an accusation, and the asset freeze is a precautionary measure rather than a verdict. The banks and the individuals named all deny wrongdoing.

Why should a foreign investor care about circularisation letters?

Because they are the routine control that lets an auditor verify what a listed company owes. If the case establishes that lenders omitted debts from them, the reliability of audited accounts across the market is what comes into question.

What happens next?

Prosecutors must decide whether to bring charges against any of the bank executives, and the securities regulator’s inquiry into the lenders runs in parallel. Itaú’s flat denial of coordination sets up a factual dispute that a court will eventually have to settle.