Opportunity Fund, Daniel Dantas could emerge with impunity from CVM inquiry

Opportunity is drafting a consent order agreement for delivery to CVM in the the securities and exchange regulator?s proceeding to investigate allegations that Opportunity Fund has had shareholders resident in Brazil (Inquérito 08/2001). The fund is a controlling shareholder in Brasil Telecom, has filed with Anatel for permission to purchase TIW?s stake in Telemig Celular and Amazônia Celular, and owns equity in Telemar. Offshore funds governed by Annex IV aren?t allowed to have domestic shareholders.
CVM?s rules allow a respondent to enter into a consent order agreement (termo de compromisso) whereby it undertakes to: ?I – cease practices, activities or actions deemed illicit, as appropriate; and II – correct the irregularities detected, paying compensation for damage caused to the market or CVM?, in the terms of CVM Ordinance no. 390.
If the board of CVM approves the proposed agreement, the proceeding is suspended ?during the period stipulated for the undertaking to be fulfilled?.

According to article 4 of the ordinance, moreover, signature of a consent order agreement ?shall not be construed as a confession that the allegations are true or acknowledgment of illicit conduct? as alleged in the original grounds for the investigation. In other words, CVM?s proceeding against Opportunity Fund may end in an agreement without punishment for the fund or its directors even if they are founded to have broken the law.

Dantas not a respondent?

In a recent order, CVM director Norma Parente, the rapporteur for the proceeding, granted extra time for a draft consent order agreement to be filed on behalf of several respondents, giving them until August 14. The following respondents were mentioned by name: Banco Opportunity SA; Dorio Ferman; Opportunity Asset Management Inc.; Opportunity Asset Management Ltda.; and Verônica Valente Dantas. Asked whether Daniel Dantas, controlling shareholder of Banco Opportunity and a director of Opportunity Fund, is a respondent in the proceeding, CVM replied that only Ms Parente could answer the question and she was on vacation.
Ms Parente will have 30 days to examine the proposal, after which she will have to submit it to the board of CVM. The board will have another 60 days to approve it. It?s relevant to note that Luiz Leonardo Cantidiano, president of CVM, at one time acted as counsel for Opportunity Fund in matters covered by the current proceeding. He?s expected to recuse himself from voting on the proposal when the board comes to decide whether to approve a consent order. Mr Cantidiano is himself under investigation by the Office of the Federal Controller in respect of his past relationship with Opportunity, allegedly interfering with the CVM proceeding against the fund and investment bank.
Another member of CVM?s board, Luiz Antônio de Sampaio Campos, has also acted as counsel for Opportunity Group companies in the past and has already recused himself from participating in any decisions affecting his former client.
Norma Parente recently acted as rapporteur in a CVM proceeding to approve the transfer of equity holdings from CVC Opportunity Equity Partners LP (also a controlling shareholder in Brasil Telecom, Telemig Celular and Amazônia Celular) to a new firm, CVC Delaware. She recommended approval despite a negative opinion from CVM?s technical experts and legal department. Ms Parente was once professionally linked to Luiz Octávio da Motta Veiga, chairman of Brasil Telecom Participações SA, but evidently didn?t consider this an obstacle to acting as rapporteur in a case involving Opportunity on that occasion.