Police suspect mining entrepreneur used Reag funds to hide assets

It is the first time the Federal Police have raised suspicions involving the use of funds managed by asset manager Reag in connection with the mining industry. According to information obtained by Valor, the investigation is expected to move forward on that front.

Reag was liquidated by Brazil’s Central Bank in January this year after the Federal Police said it was allegedly being used to launder money and hide assets belonging to criminal organizations and Daniel Vorcaro, who was the controlling shareholder of Banco Master.

The suspicion was raised in the Federal Police’s final report on Operation Parcours, which became public over the weekend and indicted Kallas and 16 other people for allegedly taking part in a scheme that illegally exploited a mine in a protected heritage area of Belo Horizonte.

According to investigators, after Kallas entered the business, a plan originally intended to restore the area was improperly used to expand mining activity without authorization, causing losses of R$832 million.

References to Reag

The Federal Police came across references to an investment fund at two different points in the investigation. In the first, investigators identified messages mentioning Reag after obtaining access to the e-mail account of the entrepreneur’s father. The inbox contained a message from an executive at Cedro Mineração, a company owned by Kallas, asking an asset manager to register the entrepreneur’s sister in a Reag fund.

Investigators were struck by the fact that the sister was not included in the e-mail exchange and that most of the assets declared in her registration form came from a company whose CEO is the same Cedro executive who had sent the e-mail.

According to the Federal Police, Kallas’s sister declared assets of R$204 million in the registration form, of which R$200 million referred to a stake in Monte Líbano Participações, whose CEO is a Cedro executive. The form also indicated that more than R$10 million would be invested. “The form also indicated that Francine [Kallas, the entrepreneur’s sister] would be willing to invest more than R$10 million, with the possibility of allocating up to 50% of that amount to Reag itself,” the Federal Police said in the report.

Mining asset dispute

The Federal Police also took testimony from an engineer–whose name was not disclosed– at Flapa, a company in the mining sector that operated at a mine belonging to Kallas’s group and that is at the center of Operation Parcours: the Granja Corumi mine.

In her testimony, she said Flapa was in court disputing two other mineral exploration areas with Kallas’s group and that one of those areas, known as Serra do Lessa, in the municipality of Itabirito, Minas Gerais, had been partially acquired by the Motezuma fund, managed by Reag.

For investigators, these elements indicate the need to expand the probe into the use of Reag’s fund structure by Kallas’s business group and his relatives. In the Parcours report, the Federal Police itself acknowledged that the registration of Kallas’s sister in the Reag fund does not allow it to state, “in isolation, that resources from the Granja Corumi mine were directed to Reag.”

“However, it reinforces the need to deepen the line of investigation into a possible parallel asset structure, use of a straw person, concealment of the ultimate beneficiary and money laundering within the economic group linked to Lucas Prado Kallas, especially given the interest in mining assets,” the report says.

What the parties say

In a statement, Lucas Kallas’s press office said it has full confidence that his innocence will be demonstrated, “because the indictment rehashes old facts that had already been investigated and shelved by the courts.” It also said Cedro has a shareholder structure that is known and declared to all authorities.

“Investment in funds is an ordinary practice in the financial system, using private funds declared to all oversight bodies. In the case of Flapa, there is a commercial dispute between the parties that was taken to court and in which Cedro prevailed at all levels, including higher courts,” the statement said.

Reag said Lucas Kallas “was never a Reag client,” as can be verified on the website of Brazil’s Securities and Exchange Commission (CVM). It also said the Motezuma fund was “administered by Planner and managed by Latache,” the same asset manager to which the entrepreneur’s sister’s registration form was sent.