‘Operation Influencer’: Portugal’s PM undone by wiretaps, lavish dinners and pile of cash

The scandal that toppled Portugal’s Socialist prime minister involved lavish business dinners with foreign investors, accusations of “influence peddling” and a mystery stash of cash. At the centre of the investigation that triggered António Costa’s resignation is a €3.5 billion data centre project called Sines 4.0, which the premier and his cabinet had been eager to promote and celebrate. Powered only by renewable energy, it was supposed to be Portugal’s biggest foreign investment in 30 years and showcase the EU’s ambition to “green” the economy and tackle climate change.

But Portugal’s public prosecutor’s office alleges that Start Campus, the company running the project, sought to secure favourable decisions from public officials via influence peddling, a criminal offence.

“Operation Influencer”, as prosecutors have labelled it, revolves around the company’s efforts to tackle bureaucratic blockages and the role played by a lawyer-turned-fixer who Costa has called his “best friend” – Diogo Lacerda Machado. The prime minister insisted he had done nothing wrong but resigned on the day the allegations were revealed last month, paving the way for a general election in March.

Opposition politicians backing the prosecutors say they are shining a light on a murky world of schmoozing and favour-seeking in which businesses seek to bypass red tape. Such practices, they say, are an affront to fairness and good governance in a country that has been an EU member since 1986.

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But the prosecutors’ critics accuse them of being overzealous and naive – and needlessly wrecking Portugal’s hard-earned reputation as a magnet for foreign capital.

One of eight formal suspects in the case is Vítor Escária, who was Costa’s chief of staff when he was arrested. Soon after, police found €75,800 in cash stuffed in envelopes in his office. The outgoing prime minister called the stash a “betrayal of trust”.

Escária’s lawyer said the money was “absolutely irrelevant” to Operation Influencer and that it “relates to [Escária’s] previous professional activity”. In 2017 the aide resigned as the premier’s economic adviser amid a scandal over a company paying for politicians to attend the Euro 2016 football tournament.

The case has also embroiled Start Campus’s two owners: Pioneer Point Partners, a small London infrastructure investment group, and Davidson Kempner Capital Management, a New York-based investment firm with $37 billion (€34 billion) in assets under management.

All the suspects – including Machado, Escária and three others with whom they spent nearly a week in custody – deny wrongdoing. None has been charged while the investigation continues.

Machado, who has had to give up his passport and post €150,000 in bail, is an old law school friend of Costa’s and was the best man at his wedding. In the past, Costa brought him in to handle thorny issues including the nationalisation of Tap airline and a banking dispute with Isabel dos Santos, the billionaire daughter of a former Angolan president.

In a court document filed by prosecutors, they allege that an unknown person “acting under the guidance and in the interests” of Pioneer Point agreed with Machado that he would, in return for financial rewards, take advantage of his close relationships with Costa and Escária.

Start Campus contracted Machado as a consultant and paid him a net salary that eventually rose to €6,533 a month, according to the filing, which was confirmed by Machado’s lawyer.

Machado’s role, prosecutors say, was to “establish contacts and exert influence and pressure on members of the government, officials of local authority bodies and other public entities”. The goal was “to determine the direction of the actions of those members and officials, or at least to ensure that their actions were carried out more quickly, all for the benefit of the project”. In one instance laid out by prosecutors, whose case relies on multiple wiretaps, they said Machado and Start Campus provided “advantages” to the mayor of Sines, Nuno Mascarenhas – another suspect. Those advantages included €5,000 in sponsorship for a music festival in the southern Portuguese town, but a judge said there was not strong evidence the mayor had committed any crime.

The same judge dismissed accusations of corruption and malfeasance against the others arrested. But he said there was evidence of influence peddling by Machado, Escária and two Start Campus executives: Afonso Salema, its chief executive, and Rui Oliveira Neves, its chief legal officer, who have both resigned. In a statement via his legal representative, Machado told the Financial Times: “In all civilised countries and capitalist economies, acting like a lawyer representing clients is not influence peddling.”

Prosecutors have also mentioned several expensive meals, including an “inappropriate” €1,302 dinner paid for by Start Campus where Salema and Neves were joined by two others who are now suspects – infrastructure minister João Galamba, who has resigned, and Nuno Lacasta, head of Portugal’s environment agency – along with a third person.

Start Campus’s project, which is located close to a deepwater port in Sines and is due to open its first data centre next year, was grappling with two big issues. One was getting permission to build in a conservation zone that is home to protected species including frogs and owls, which it eventually received. The other was securing sufficient connections between Sines 4.0 and the national electricity grid, which is an ongoing battle.

Critics have sought to highlight prosecutors’ errors, including a wiretap in which they mistakenly took a mention of economy minister António Costa Silva to be a reference to the then prime minister.

But the main argument against prosecutors is that they have been too puritanical in their approach and failed to understand the workings of business and investment promotion. Machado’s lawyer said: “Of course it’s lobbying. But it’s not illegal. This is the criminalisation of a political-administrative project.”

Start Campus, which is itself a suspect in the case, said last month that it “reaffirms its unequivocal commitment to transparency, legality and the integrity of all its operations”. It said Pioneer Point and Davidson Kempner were “committed to the continued development of the project”.

Four days after his resignation, Costa addressed fears that Operation Influencer would scare off investors. He said he needed to defend the public sector’s role in luring capital and simplifying procedures “so that future governments do not lose the political tools essential to attracting investment”.

Costa has not been named as a suspect or formally accused of wrongdoing, but his conduct is under the scrutiny of the supreme court, whose prosecutors are separately gathering material that could precede an official investigation.

He was wounded, however, by the disclosure that some suspects had “invoked the name and authority of the prime minister and his intervention to unblock procedures”. Costa said he never spoke to Machado about Start Campus – and that he quit to preserve the “dignity” of his office. The case has prompted soul-searching in Lisbon about the rights and wrongs of lobbying, which is largely unregulated in Portugal, and even hospitality events.

A foreign diplomat wondered whether it had become risky to hold an embassy cocktail party to introduce business people to public officials: “Where do friendly processes end and where does malfeasance begin?” – Copyright The Financial Times Limited 2023