Breaking News

Tweet TWEET

Batista Bases Insider-Trading Defense on Mubadala Deal

Eike Batista, the former billionaire fighting insider-trading allegations, sold shares of his oil company last year to pay back creditor Mubadala Development Co. rather than anticipating project failures, according to his legal defense.

Batista, 57, who sold shares of his oil unit weeks before announcing the cancellation of projects, did so to meet a $2 billion collateral obligation with the Abu Dhabi-based sovereign wealth fund, according to a document Batista’s his defense presented to the country’s securities regulator and obtained by Bloomberg. The businessman didn’t profit from the sale of shares in OGX Petroleo & Gas Participacoes SA, as the company was then known, according to the document.

“The accused didn’t act with the objective of profiting from an inappropriate advantage but to fulfill a previous obligation,” Batista’s lawyers wrote in the document presented to the regulator on May 14. “In practice, the OGX shares already belonged to Mubadala at the time of the facts being questioned.”

Mubadala gave Batista’s projects a seal of approval in early 2012 when the former boat-racing champion was rising in global wealth rankings. The sovereign fund valued his empire of logistics and commodities companies at more than $35 billion following due diligence for a $2 billion deal with Batista’s holding company. Batista regularly mentioned the deal as evidence his oil, mining and transport projects were “idiot proof,” even though they were yet to make money.

Controlling Shareholder

The Brazilian market regulator CVM is investigating whether Batista, as controlling shareholder and chairman of OGX, broke trading rules on insider trading and price manipulation, it said April 11. The entity has eight separate probes into companies that were part of Batista’s conglomerate, the CVM said.

Batista sold 126.7 million shares of OGX worth 197 million reais ($89 million) between May and June of last year, his first divestment in the company, before the oil company announced the cancellation of offshore projects it had previously declared economically viable, and the possible closure of its only producing wells.

OGX shares and bonds plummeted to record lows after the July 1 announcement. The oil producer filed for bankruptcy protection in October as most of its oil deposits once valued by Batista at $1 trillion turned out to be duds.

Share Tumble

The CVM said in an e-mailed reply to questions yesterday that the investigation and the eight related cases are ongoing, without elaborating. Mubadala didn’t respond to an e-mail seeking comment.

The Batista defense also argues that the fact the businessman bought about 15 million reais in OGX shares on March 26, 2013, supports its case that he didn’t have conclusive information on the inviability of the projects.

Shares of OGX, renamed Oleo e Gas Participacoes SA late last year, were unchanged at 17 centavos at 11:45 a.m. in Sao Paulo. The stock lost 90 percent in the past 12 months.

On April 4 last year, OGX shares fell low enough for Mubadala to force Batista to pay back the $2 billion debt with shares, the document, signed by Batista’s lawyers including Sergio Bermudes and Darwin Correa, said. Batista transfered to Mubadala other assets, including cash and an indirect stake in Burger King Worldwide Inc., to avoid liquidating his entire position in OGX, it said.

“The now accused managed to prevent Mubadala from continuing the sale of OGX shares,” according to the document. “It was the accused, personally, who lost the most due to the OGX crisis.”

To contact the reporter on this story: Juan Pablo Spinetto in Rio de Janeiro at jspinetto@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Peter Millard

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.