ANDY HOFFMAN

Friday, July 11, 2008

Seeking evidence in a fraud and tax evasion investigation, police raided the home and offices of Brazil's richest man, Eike Batista, whose companies' major shareholders include the Ontario Teachers' Pension Plan.

Brazilian federal authorities are investigating the possibility of fraud in the state government's granting of a concession to operate a railway in northern Brazil to a Batista company, MMX Amapa. They are also investing allegations of smuggling of “gold mined in its mines in the state,” the company said.

In a statement, Mr. Batista's company denied the allegations. It also said “it does not carry out any gold-mining activity in the state of Amapa or in other regions of the country and is not involved in any smuggling activity.”

Shares in three of Mr. Batista's publicly traded companies fell sharply in Brazil, erasing as much as $6-billion in market value.

Teachers has major stakes in Batista companies that include iron ore miner MMX Mineracao e Metalicos SA, oil and gas play OGX Petroleo e Gas Participacoes and a 15-per-cent position in logistics company LLX Minas-Rio Logistica SA, which had been planning a public stock offering.

“We are trying to find out as much information as we can,” Bob Bertram, Teachers head of investments, said in an interview.

The pension fund's holdings in Mr. Batista's companies are among its five largest.

“I'm personally 100-per-cent confident in Eike Batista and his companies. These are simply allegations that will be dealt with,” Mr. Bertram said.

Canadian investment bank BMO Nesbitt Burns is also closely tied to Mr. Batista, having led financings and stock offerings for MMX and OGX.

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