Central bank assessing appeal against KPMG acquittal

  • Lusa
  • 22 December 2020

Mário Centeno assured that the central bank is assessing the conditions for appealing the decision of the Competition Court which annulled the fines he imposed on BES's auditor.

The governor of the Bank of Portugal (BoP), Mario Centeno, said on Tuesday in parliament that the central bank is assessing the conditions for appealing the decision of the Competition Court, which annulled the fines he imposed on BES’s auditor, KPMG.

“The Bank of Portugal is assessing the conditions for appealing against that decision,” Mário Centeno said when he was heard today by the Parliament’s Budget and Finance Committee (COF) by video conference.

“We are all still learning a lot about this, and the first instance judgment on this case must be understood in this context as well, and we will always be available, and we have made regulatory interventions to bring about legislative changes in this context that should be the subject of debate next year,” concluded Mário Centeno on the subject.

On December 15, KPMG and five of its partners were acquitted by the Competition Court of all the administrative offences for which they were convicted in June 2019 by the Bank of Portugal in the BES case.

In reading a summary of the sentence, which lasted about two and a half hours, Judge Vanda Miguel rebutted the accusations made by the supervisor, concluding by the lack of evidence as to the violation by the defendants of rules that should have led to the issuance of reserves to the consolidated accounts of Banco Espírito Santo (BES).

In June 2019, the Bank of Portugal ordered KPMG to pay a fine of €3 million along with its chairman, Sikander Sattar, €(450,000), Inês Viegas (€425,000), Fernando Antunes (€400,000), Inês Filipe (€375,000) and Silvia Gomes (€225,000), all of whom appealed to the Court of Competition Regulation and Supervision (TCRS) in Santarém.

The TCRS today considered the application for annulment brought by KPMG and Associates to be ‘fully well-founded’, overturned the BoP’s conviction and acquitted all the applicants, a decision of which both the supervisor and the Public Prosecutor announced that they would appeal.

The Court criticised the BoP’s view that KPMG should have provided information liable to give rise to reservations about BES’s accounts, stressing that it cannot be “a mere ‘messenger’ of the supervisor”.

Starting with the point that generated the most discussion during the trial initiated on September 3 at the Competition, Regulation and Supervision Court (TCRS), that of the interpretation of article 121(1)(c) of the General Regime of Credit Institutions and Financial Companies (RGICSF), regarding the moment at which facts likely to generate reservations to the accounts of a financial institution should be communicated, the judge considered that the BoP’s understanding “is not in accordance with the ‘legis artis’ and with what is normal in auditing life”.

Vanda Miguel even said that he was “startled” by the BoP’s “vague” response to the letter sent to it by the TCRS to find out how many reports of potential non-compliance had been made to the interim supervisor of an audit, stressing that pointing out a specific number would in no way “conflict” with the “banking secrecy” invoked by the regulator.

He also stated that it was ‘strange’ that the supervisor stated that he had no further misdemeanour proceedings on this matter, given the widespread understanding of auditors and auditees heard in a judgment contrary to that of the BoP.

As he concluded, only after exhausting all audit procedures does the auditor have a duty to report and not while the interim information review process is in progress, as the BoP intended in this case.