Daniel Vorcaro started living it up after becoming the head of Banco Master, a mid-sized Brazilian bank, in 2019. Over the next few years he spent lavishly on properties, private jets, a luxury hotel and a football team. He splashed more than $3m on his daughter’s 15th birthday party. As the champagne flowed and the jets racked up miles, some questioned how Banco Master was growing so fast. The bank’s business model was based on selling bank-deposit certificates, a popular fixed-income product in Brazil, with unusually high interest rates.
Cracks started to emerge in September, when Mr Vorcaro suddenly tried to sell the firm. He found a willing buyer in Banco de Brasília (BRB), a lender controlled by the government of Brazil’s federal district. Yet when the Central Bank dug into the details of the merger, it found that Banco Master had no liquidity. Investigators discovered that it had sold worthless credit portfolios to BRB for more than $2bn. Soon after, Mr Vorcaro was arrested as he tried to board a private jet to Dubai. Brazil’s deposit-insurance fund will shell out $7.5bn-10bn to reimburse savers, the largest such compensation in Brazil’s history.
The saga could have ended there. But the effects of Banco Master’s collapse reach beyond the banking sector. That is because Mr Vorcaro spent years cultivating ties to Brazil’s elite. The case has exposed links between politicians, financial bigwigs and the judiciary in Brasília, the capital, damaging the reputation of the Supreme Court and Congress.
The plot began to twist shortly after the Central Bank ordered Banco Master’s liquidation in November. Jhonatan de Jesus, a member of the Federal Court of Accounts (TCU), an auditing body whose members are appointed by Congress, claimed that the Central Bank had acted too hastily. He ordered an investigation into whether it could have chosen alternatives to liquidation. “That kind of interference in the Central Bank’s authority is unusual and worrying,” says a senior prosecutor working on the case. Mr Jesus has close links to the Centrão, a group of ideologically fluid parties that control Congress and have a long history of corruption.
Politicians from the Centrão tried to protect Banco Master before it went bust. Senator Ciro Nogueira, the former chief of staff to Jair Bolsonaro, a right-wing populist and former president, tried to block a congressional inquiry into Banco Master’s dealings, and pushed for a bill that would have given Congress the power to fire the boss of the Central Bank. Meanwhile Ibaneis Rocha, the bolsonarista governor of Brasília, vigorously defended BRB’s acquisition of Banco Master, even though many analysts strongly cautioned against it. (A judge has since removed BRB’s chief executive due to potential political interference.) Mr Vorcaro’s brother-in-law, Fabiano Zettel, who is also under investigation, was the largest individual donor to Mr Bolsonaro’s campaign in 2022, and to the campaign of Tarcísio de Freitas, the right-wing governor of São Paulo.
When investigators opened Mr Vorcaro’s phone, they found even more links to power. The bank had signed a deal worth $24m over three years with a law firm run by the wife of Alexandre de Moraes, an influential Supreme Court judge. The vagueness of the contract and large sums involved are “not normal” by Brazilian standards, says one legal expert. Soon after, a newspaper revealed that Mr Moraes had phoned or met Gabriel Galípolo, the head of the Central Bank, several times in the run-up to Banco Master’s liquidation.
Mr Moraes and his wife have denied wrongdoing. The attorney-general has shut down an investigation into the couple, citing insufficient evidence of misconduct. Mr Moraes says he and Mr Galípolo met to discuss matters unrelated to Banco Master. Yet his imperious behaviour has raised eyebrows. On January 14th he opened an investigation into Brazil’s financial-intelligence unit and the federal revenue service to find out whether they had leaked information about the contract.
The optics are no better for Mr Moraes’s colleague, José Antonio Dias Toffoli, a judge, who has shut down other anti-corruption investigations into Brasília’s elite. Mr Toffoli travelled on a private jet with a lawyer for Banco Master around the same time as the Supreme Court’s lottery system assigned him to lead the case against the firm. It then transpired that Mr Zettel had invested over $1m in a resort that belonged to Mr Toffoli’s brothers. There is no evidence that Mr Toffoli knew of the matter, and he has not spoken publicly about it.
Yet these ties reinforce the impression among Brazilian voters that the country’s top court lacks impartiality. To combat such suspicions, the court’s new president, Edson Fachin, a sober judge who avoids the limelight, proposed that the bench adopt an ethics code modelled on that of Germany’s constitutional court. Mr Fachin’s colleagues scoffed.
The one clear winner from the sleazy saga is Mr Galípolo, the Central Bank boss, who has stood firm against pressures to save Banco Master. Mr Jesus was forced to withdraw his inquiry. Since then, Mr Galípolo has asked lawmakers to give the bank administrative, budgetary and financial autonomy, beyond the operational autonomy it already enjoys. That would give the bank more robust powers of supervision over financial institutions, and respite from Brasília’s dubious machinations. ■
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