The legal chief at MMX has denied the fraud allegations against the company, saying that although litigation may go on for a while, the US$5 billion sale of assets to Anglo American would be unaffected.

The home and offices of controlling shareholder Eike Batista were raided on Friday by federal police investigating possible fraud in the granting of a concession to run the Amapa railroad, as well as gold smuggling.

Paulo de Gouvêa, Batista’s main legal advisor, emphasised that as yet no formal charges have been made, only an investigation. “ [The] worst case scenario is that this investigation becomes a formal criminal charge against certain individuals related to the company, and this would potentially drag for a number of years,” he says. “We would end up spending a lot of time and a lot of money in attorney fees, but in connection with a lawsuit against individuals, and not in connection with the company.”

All three claims against the company were refuted by de Gouvêa – firstly, that the company could not be guilty of gold smuggling because “we have not ever produced a gram of gold”, and secondly, that the charges relating to conversations between a local gold producer and the government  “are made of a conversation with someone who was not an employee when this happened”.

The third set of charges, relating to the railway concession, was, says de Gouvêa, equally unfounded. “This tender was a public tender; there were no restricted partners of any kind. It was a simple awarded concession to whoever made the highest bid.” Subsequent legal challenges against the tender were thrown out of court, and the concession has since been audited successfully by state attorney, he noted.

Batista has offered a personal indemnity to Anglo American for any losses it could suffer as a result of the investigation in its purchase of part of MMX, including the railway concession under question.

The indemnity is already built into the agreement, as is common in such transactions, emphasised de Gouvêa. “ [It] would effectively cure any alleged misrepresentation or breach in the agreement or any allegation that the material adverts changed, and conditions of the business of the company,” he says.

Sergio J Galvis of Sullivan & Cromwell LLP is leading the team negotiating that deal for Anglo – his client has issued a statement saying it is monitoring the situation and it was “hopeful the issues would be resolved satisfactorily”.

The MMX team has hired Marcio Thomaz Bastos, former minister of justice and one of the country’s most high-profile criminal lawyers, to investigate the files and the actions of the police. With him, the company is preparing a formal notification refuting the allegations and the inaccuracies they have identified in the investigation.

The investigation is something of a baptism of fire for the new general counsel of EBX – the holding company which control’s Batista’s assets - Claudio Lampert, who has only been in the job since early June. His predecessor de Gouvêa, who is moving over to the finance side, took the lead in refuting the allegations publicly.


Counsel to MMX

In-house counsel – Paulo de Gouvêa and Claudio Lampert

For the investigation

Marcio Thomaz Bastos

For the Anglo-American deal


Davis Polk & Wardwell

Partners John Amorosi, Manuel Garciadiaz, Kathleen L. Ferrell and Diane Kerr and associates Joana Benjamin, Paul Hodgdon, and Oliver Smith

Gibson, Dunn & Crutcher LLP

Partners Kevin W Kelley and Helena Berti and associates Lisa Alfaro and Bernardo Coindreau


Mattos Filho, Veiga Filho, Marrey Jr e Quiroga Advogados

Partner Carlos Barbosa Mello and Moacir Zilbovicius and associates Angélica Pedroso and Paula Vieira de Oliveira

Counsel to Anglo American


Sullivan & Cromwell LLP

Partner Sergio J Galvis and associates Werner Ahlers, Arianna Pretto-Sakmann and Jaime Ramirez


McCarthy Tétrault LLP

Partners Sven Milelli and Roger Taplin


Machado, Meyer, Sendacz e Opice Advogados

Partners In Hee Cho, José Roberto Opice, José Ribeiro do Prado Júnior and Eliana Ambrósio Chimenti, associates Watson Possato, Fernando Tonanni, Liliam Yoshikawa, Flávia Ferraz, Milton Pinatti Ferreria de Souza

(Latin Lawyer 16.07.2008)