French-Israeli telecom magnate Patrick Drahi is in the headlines once again as news emerged this week that his Altice cable company co-founder and former COO, Armando Pereira, was detained in Portugal and remains in custody amid a sweeping corruption investigation.
Subsequently, Alexandre Fonseca, chairman of Altice USA and co-CEO of Altice Group, removed himself from all executive and non-executive duties at the company. Fonseca resigned from the board of Altice USA on July 15, according to an SEC filing.
Pereira’s detention came amid a three-year investigation into private corruption, tax fraud, and money laundering, according to published reports. Pereira is set to be questioned by a judge but it will not happen before tomorrow (July 19), the reports said.
The involvement of executives at the Drahi-owned multinational has left some with questions about what the implications are for Sotheby’s.
Just over four years ago, Drahi acquired the nearly 280-year old auction house for a cumulative $3.7 billion, and took it private via his wholly owned U.S. company, BidFair USA. Shares of Sotheby’s had formerly traded on the New York Stock Exchange under the ticker symbol BID.
While there is no direct connection between the corruption probe in Portugal and Sotheby’s, observers said the turmoil at two Drahi-owned companies is, at the least, a distraction at a time when the international art market has shown some signs of cooling and competition between the major auction houses remains intense.
“It’s pretty far removed, both geographically and probably from a management standpoint,” said an advisor who works closely with auction houses on behalf of consignors and clients. “But it’s certainly nothing that anybody wants to deal with. There are enough questions in the marketplace to begin with that no auction house wants to have anyone focus on anything other than the art market. No distraction is helpful in a weakening market.”
A representative for Jean Talamet, one of Pereira’s attorneys, told Artnet News, “At this point we don’t know how Mr Drahi or Sotheby’s could in anyway be impacted in the case involving Mr Pereira.”
Sotheby’s did not immediately respond to request for comment.
The latest scandal comes on the heels of what appear to be other tax-related woes for Drahi. Last fall, a cache of leaked documents obtained by hackers revealed that Drahi’s art collection valued at roughly $750 million and was facing challenges from Swiss authorities about possible tax penalties linked to the question of which “canton” or region he resides in.
According to a report in last November: “A battalion of tax experts, a possibly backdated contract and several Caribbean shell companies: These were the components of the operation that allowed Patrick Drahi to avoid paying taxes on the transfer of his vast artwork collection, estimated to be worth [approximately] €750 million. This aggressive tax optimization strategy flirts with the edge of legality,” according to the report.
Another of Pereira’s attorneys, Pedro Marinho Falcao, told that his client “has been the target of a widespread attack in Portugal in recent days. The communication surrounding this operation was done in such a way that it led to his being immediately found guilty in public opinion…the reality is not so simple.”
Drahi co-founded Altice, the telecom group that includes Altice Europe NV and Altice USA, which is listed on the New York Stock Exchange. While Pereira no longer holds a formal role at the company, he has long been considered Drahi’s “right hand man,” sources told Bloomberg.
Years of aggressive acquisitions driven by borrowing have left the businesses under the Altice umbrella with more than $50 billion of debt, according to the Bloomberg report.
Meanwhile, Altice USA’s chief procurement officer Yossi Benchetrit, who is Pereira’s son in law, has been placed on leave while the company carries out an internal investigation in response to the “circumstances in Portugal.”
“We take this investigation very seriously and will continue to act diligently and with urgency to make decisions that are in the best interest of our employees, customers, and shareholders,” said Dennis Mathew, chairman and chief executive officer of Altice USA in a memo cited by Bloomberg. “Altice USA conducts its business with the highest integrity.”
According to a separate Bloomberg report, bonds tied to Altice Group slumped after the news that key company figures are caught up in the corruption probe broke. “Altice International’s junior notes dropped around 10 cents on the euro to 54.5 cents since the start of the week,” the report said.
