Brazil Soccer Body May Lose Half of Profit in Bank Failure

Brazil’s soccer federation may lose half its 2012 profit following the collapse of a bank that had been at the center of a government graft scandal, according to a person familiar with the matter.

Confederacao Brasileira de Futebol, or CBF, deposited about 30 million reais ($13.14 million) with Belo Horizonte-based Banco Rural over the last decade, said the person, who asked not to be identified because the information is private. Brazil’s central bank liquidated Rural this month citing “serious” legal violations.

The potential loss of its investments in Rural is happening as CBF, the private body that controls Brazil’s national team, prepares for the World Cup next year when Brazil hosts sports’ most-watched event and seeks a record-extending sixth title. Rural, which specialized in lending to small and medium-size companies, was closed after “successive losses generated abnormal risk to creditors,” the central bank said Aug. 2.

Rural executives, including former Chief Executive Officer Katia Rabello, were convicted last year by the Supreme Court of money laundering and mismanagement of a financial institution as part of the high court’s ruling in the so-called Mensalao case.

Officials from the ruling Workers’ Party -- including former cabinet chief Jose Dirceu under President Luiz Inacio Lula da Silva -- were found guilty by the Supreme Court of using embezzled public funds and fraudulent loans from Rural to buy votes in the Congress from 2003 to 2005.

2012 Sales

Folha de S.Paulo said the CBF’s chief financial officer and treasurer were fired. “This is an internal situation and we are not making any comment,” said a CBF official, who requested anonymity in line with the organization’s policy.

CBF, which had 2012 sales of 382 million reais and net income of 55.6 million reais, risks losing the majority of its money held at Banco Rural because of the terms of the bank’s liquidation. The central bank declined to comment, according to an e-mailed statement.

Brazil’s deposit insurance fund guarantees Rural’s certificate of deposit, local agricultural letters of credit and deposits of as much as 250,000 reais. Amounts above 250,000 reais will be evaluated by the liquidator, according to a Rural statement on its web page. The deposit insurance fund also guarantees investments in the so-called DPGE, a local bank note, of as much as 20 million reais.

Rural was the eighth Brazilian mid-size bank liquidated by the central bank or bailed out by deposit insurance fund since 2010 in the wake of the financial crisis. Banco Panamericano SA was the first to be rescued after authorities investigated it on accounting irregularities.

The majority of the CBF’s banking is done with sponsor Banco Itau, said the person with knowledge of the matter. Banco Itau paid 30.1 million reais to sponsor the CBF, and the Brazil soccer team, in 2012.

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