Wherever we look at, we only saw signs of looting of the firm...
Everything in C.G. was “for the English to see”. Part 1
A lot of C’s people worked very hard to fix CG…useless work?
The new President of C International, K.S.(RIP), a new hire that had occupied a high position at a multinational insurance entity in Japan, had asked me to go to Rio de Janeiro and take care, temporarily, “for only 6 months”, he said, of the immense C.G. (2,500 employees, 25 large branches all over Brazil, $ 1 million dollars of monthly expenses, more than $ 1.6 Billion of annual invoicing, including insurance premiums and annualized monthly payments of Health Plans).
The company wrote many group accounts on the insurance side, including some very large private companies, as well as most of the large Brazilian
“Our partner the bank, he said, has asked C, as an insurance expert, to place in CG a C’s man”.
Although I wasn’t precisely a Health expert, I knew more about it than the average person did.
Besides, I had heard that what CG needed, at least at this stage, was to rationalize its expenses plus better Management and of that, I did know quite a bit.
Therefore I accepted the position.
CG, one of the largest Health consortiums of Brazil, was active in both, insurance programs (it owned an insurance company), and health plans, subscribing as much as C Corporation in the USA, and had its H.O. on its own building in Rio de Janeiro.
I remember that on the first day we visited CG, some 12 people traveled from Sao Paulo to Rio, between personnel from C and from the bank,
We all traveled together in a commercial flight, but on arrival at the Santos Dumont airport in Rio, two helicopters that were waiting for us there, took us to the building of CG, in a neighborhood of Rio de Janeiro.
We landed on the roof of the building and — like army commands — we went down through a narrow spiral staircase to CG’s Management area located below, in what was a floor of the building, amid the nervous expectations of the local employees.
In financial dire straits, CG’s owners had resorted to the bank requesting help … and the bank gave them financial help represented by loans … in exchange for an option to convert the loans, at the bank’s election, in
the total of CG ‘s shares.
Now the bank was offering its partner C, an American company specializing in Health Plans and Health insurance policies, equal participation on its loans with an option to buy CG if C matched the bank’s investment in CG (At that time $ 100 million dollars).
Supposedly, CG guaranteed the loans with various real estate properties of its ownership, occupied by hospitals, offices, and branches all over the country, properties detailed in a contract to which we eventually had access.
Obviously, C wanted to know if there was something hidden that potentially could derail the operation.
In order to find out, we engaged a prestigious accounting firm (AA), to perform an audit of the company and tell us the real economic situation of CG.
About 15 days later, the auditors delivered a report that said that CG owed the Brazilian IRS roughly $1 Billion Dollars in unpaid corporate taxes.
Furthermore, the report also indicated that most, if not all, of the real estate listed in the contract with the bank had already been given as guarantee to other previous loans, therefore they were useless as guarantees to the bank’s loans and rendering those, in fact, as unsecured loans.
(“For the English to see...”)
You see, Brazilians have hardly changed with the pass of time. Back in the age when England was ruling the world, the British had abolished slavery in 1833 and had signed a treaty with Brazil (which the Brazilian Government half-heartedly supported), by which British ships would patrol the coasts, and arrest any ship or anyone trying to bring ashore more slaves.
Having announced the upcoming visit of a British ship to Rio de Janeiro, where the slaved colored people were still a good part of the wealth of many families, as slavery still flourished and was frequent in Brazil, the population of the city owning slaves and the city’s authorities, were quickly making arrangements “for the English to see”, hiding all the slaves from public view, and making sure that there weren’t any signs of slavery in the city.
Ever from then, Brazilians have used the phrase to represent something they do just for appearances, something done just to show.
Having read the report from the auditors, many of us came to believe that it was the end of the Brazilian CG’s adventure of C in Brazil, as our higher Management had always been very conservative in the past.
However, not at this time, as the financial operation followed its course: C transferred $ 100 Million Dollars to the bank, and now for me, the “temporary” six months job was going to convert in almost two years, as
President of CG.
It seems that our partners from the Jewish M. family, managing the bank, had a lot of credibility with C’s higher Management, and, apparently, they had said that falling behind in the payment of taxes by companies was very common in Brazil and that in similar situations occurring in the past, the Brazilian Government had conceded up to 100 years to pay the due back taxes to the companies involved.
With regard to the real estate already pledged and given as “guarantees” to the loans, the bank’s position was that as C “fixed” CG, the pledged properties would be freed and totally ours, so there was nothing to worry about.
(“For the English to see”)