Bankers at war: boardroom feuds during eurozone crisis exposed by Portugal probe

LISBON, Portugal – Beware of bankers bearing a grudge.

An investigation by Portugal's Parliament into last summer's collapse — and 4.9 billion euro ($6 billion) bailout — of the country's largest listed bank has turned into gripping television as members of the wealthy Espirito Santo banking dynasty wash their dirty laundry in public.

The finger-pointing involves alleged shady businesses, struggles for power, and murky dealings in Africa.

Regulators have already accused Banco Espirito Santo's leadership of fraud, forgery and money-laundering in the run-up to its collapse in July.

Banco Espirito Santo's demise reignited fears over Portugal, which is one of the eurozone's most fragile economies and which needed to be bailed out in 2011. It also raised questions over other potential financial skeletons in Europe.

The committee hearings are trying to figure out how Espirito Santo's international tourism-to-farming business empire, with the bank at its heart, collapsed so suddenly.

The tensest moment of the hearings in Parliament came last week with the testimony of two cousins: dapper former bank CEO and family patriarch Ricardo Espirito Santo Salgado, 70, who rubs shoulders with European royalty; and pugnacious board member Jose Maria Ricciardi, who is 10 years younger and tried to oust Salgado in a boardroom coup last year.

In almost 17 hours of testimony that ended in the early hours of the morning, the pair testified separately and gave contradictory versions of events.

Salgado denied any wrongdoing and pointed the blame at others. The Portuguese government and Bank of Portugal, he claims, refused his last-minute plea to help the bank avoid bankruptcy.

And Salgado accused a rogue Luxembourg-based company accountant of concealing debts of more than 1 billion euros. He also regretted obscure business deals at the bank's Angolan arm, BES Angola, which holds more than 1 billion euros in bad loans to reportedly unidentified creditors.

Amid occasional memory lapses and an insistence that some Espirito Santo board proceedings were not recorded, Salgado was unable to identify who held a 30 percent stake in Luxembourg-based Espirito Santo International, an umbrella company in which the family owned the balance.

Ricciardi came into the cramped hearing room after his cousin and stunned parliamentarians with his version of events. He claimed to have tried to blow the whistle on the group's financial difficulties in a letter to regulators last May and said the over-exposed bank should have requested state aid as far back as 2008.

Salgado, who is suspected by regulators of concealing problems by shifting money around group companies to plug financial holes, hinted that his cousin "had something to gain" by contacting regulators. He didn't elaborate on that claim, though.

Ricciardi insisted that Salgado was at the center of events concerning group interests that stretched from Libya to Panama and that no major decisions were taken without Salgado's consent. He also said recording equipment at board meetings was on a table for all to see.

More fireworks are expected later this month when the Luxembourg-based accountant accused by Salgado will appear at the hearings. The committee had been unable to locate accountant Francisco Machado da Cruz, but after Salgado's testimony he phoned the committee and offered to attend. The former head of BES Angola is also due to appear.

Salgado, who was arrested in July and released on a 3 million-euro bail, is likely to stand trial next year.