Banco Espirito Santo to repay clients $1.7 million
By Beth Healy
Secretary of State William F. Galvin settled charges with a Portuguese bank that it allegedly sold securities to Massachusetts residents without a license. Under the agreement, Banco Espirito Santo will reimburse clients of its former New Bedford office more than $1.7 million.
The bank, part of Espirito Santo Financial Group in Luxembourg, had a New Bedford money transmitting office until 2007. It was used largely by Portuguese immigrants to wire money home, Galvin said.
Representatives of the company from Lisbon, the island of Madeira and other locations, would contact the Massachusetts customers when they had CDs maturing, to sell them investments, Galvin alleged. Those investments, which were not registered to be sold here, included Portuguese mutual funds and portfolio management accounts.
"This entity had no business selling these investments," Galvin said. "As a consequence it appears that hardworking immigrant folks lost money, and we’re eager to help people get their money back when we can."
It was through an internal investigation that Banco Espirito Santo learned that it had sold such products to about 5,800 Americans since 2004, according to the settlement document.
In June, the law firm hired by the bank to conduct the investigation informed Galvin's office of its findings. Among the complaints the bank had received, alleging misleading sales pitches, were three from Massachusetts customers. As part of the settlement with the state, the bank neither admitted nor denied the charges of unlicensed representatives selling unregistered securities.
Most of the investors were small, with accounts of around $10,000, Galvin said. Under the settlement, the bank will repay Massachusetts customers -- $1.7 million in principal losses, plus 6 percent annual interest. There were about 100 investment products involved in the losses, Galvin said.
(Maria Sacchetti of the Globe staff also contributed to this report.)