How an unholy Portuguese banking mess spooked European markets and took down a financial dynasty |

The Espirito Santo family, built a global financial empire that survived revolution and exile to exert an oversized influence over the economic and political life of their homeland.

Repercussions were swift as it became clear that the complex web of companies surrounding the family had been used to hide billions of dollars in debts that could no longer be paid.

A planned $17-billion merger between Portugal Telecom and Brazil's biggest phone operator Oi had to be revised to the Portuguese company's disadvantage after an Espirito Santo sub-holding called Rioforte defaulted on a loan to PT worth more than $1 billion.

BES's local unit in Angola led the government there to issue a state guarantee of $5.7 billion to cover 70 percent of loans issued by Banco Espirito Santo Angola, a major player in the oil-rich African state.
In the old days, the Espirito Santos might have used their extensive political connections to wriggle out of their hole.

The Bank of Portugal was anxious to show its adherence to new EU rules on bank supervision at a time that fresh technocratic government ministers aren’t part of the family's old-boy network.

Portuguese utilities to Chinese buyers — deals in which a BES unit served as financial advisor. Another investigation concerns suspicions of bribery in the 2004 sale of German submarines to the Portuguese navy.

It looks like the end for a banking dynasty that mingled with kings and presidents, courted showbiz stars and shocked opinion in recession-hit Portugal last year when one member told a magazine how much the clan enjoyed "playing at being poor people" while slumming it at their rustic-chic beach retreat south of Lisbon.

Espirito Santos were one of a handful of families that ran the Portuguese economy under the long dictatorship of Antonio Salazar. They suffered imprisonment, nationalization and exile in 1975 after a leftist revolution toppled the regime, then deployed influence with the White House, French presidents and European royals to secure the release, return and eventual repurchase of their nationalized bank.