Cedae Investment: Castro Ally & R$200M Master Bank Deal

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Antonio Carlos took over as Cedae’s Administrative-Financial and Investor Relations Director at the end of 2022 and, around ten months later, issued an opinion in which he classified it as “timely and urgent to review the company’s Financial Investments Policy”. The policy provides that Cedae makes “investments with low exposure to all sources of risk”, with the sole objective of “avoiding the loss of value” of its cash resources.

The new policy proposed by Antonio Carlos’ board, and approved in September 2023, lowered the parameter for investments. The document now allows Cedae to purchase shares from financial institutions with a minimum rating of BBB- — which would correspond to tenth position on a scale of 1 to 16.

It was precisely the evaluation that the Master had received in 2022 from Fitch, one of the three main risk agencies in the world. Until then, Cedae’s application policy only allowed purchases from institutions rated at least A-, three steps above the Master’s grade at the time.

Furthermore, the change in policy allowed investments in institutions evaluated by “at least one of the three main agencies”, another innovation that ended up favoring the Master. Previously, the rule was to be evaluated by “two of the three main agencies”, a criterion that the Master did not meet.

When contacted, Antonio Carlos stated that the financial investment policy had already undergone two other reviews before, in November 2022 and March 2023, and that all updates “complied with legal and compliance rites and analyses, as well as approval by the executive board, audit committee and board of directors”.

Documents consulted by GLOBO show that Cedae’s legal department had reservations about the relaxation of investment rules. In an opinion, the lawyers pointed out that the new application policy would lead to an “increase (…) level of risk”, and recommended that Cedae’s leadership evaluate “whether the proposed changes — with a bolder profile — are in line with the company’s plans.”

The audit committee approved the change with a contrary position from one of its members, Aristotle Drummond. He, who is no longer part of the committee, suggested “maintaining the AAA rating for security reasons” for Cedae’s investments, but was defeated.

The board of directors also gave its approval, on September 12th, in a meeting that included a presentation by Antonio Carlos to defend the change. One of the members of the council is the president of Cedae, Aguinaldo Ballon, who also had a previous stint at the Guanabara Palace: he was the right-hand man of the current secretary of the Rio Civil House, Nicola Miccione, another close ally of Castro.

Still at the end of 2023, shortly after the change in investment rules, Cedae acquired R$200 million in CDBs issued by Banco Master. In a statement to the market last month, Antonio Carlos stated that Cedae started to make partial redemptions of this amount in September 2025, after Fitch downgraded the Master’s rating. The CDBs predicted a yield of 113% of the CDI, a rate of return considered high.

GLOBO found that, although the shares sold by Master to Cedae had the option of “immediate redemption”, Antonio Carlos stated, in meetings of the board of directors throughout 2025, that he would make the withdrawals “gradually” to redirect the funds to other institutions. With the settlement of the Master in November, R$220 million were retained with the bank, to which Cedae would have been entitled, considering the income from the amount invested. In the statement to the market, Cedae stated that it is “taking appropriate measures” to try to recover the money, which is not yet expected to occur.

The case that will be judged this Thursday at the TCE-RJ arose from a complaint by state deputy Luiz Paulo (PSD-RJ). Before discussing the case, the rapporteur, advisor Rodrigo Melo do Nascimento, asked Cedae for explanations about the “risk analysis that preceded the decision on the investment policy”.

In a note to GLOBO, Antonio Carlos said that the contributions to the Master complied with the limits of Cedae’s application policy so as not to concentrate resources in a single institution. He justified the change in investment policy due to the “importance of financial income” at a time when Cedae “presented an operational loss”.

Before serving as Cedae’s financial director and Castro’s cabinet, Antonio Carlos was president of Detran between 2019 and 2020. The body was linked to the vice-governorship, held by Castro at the time. At the end of last year, in yet another gesture of closeness, Antonio Carlos recorded a visit to Castro at the Guanabara Palace.

“Today I met with our governor Cláudio Castro to thank him for the vote of confidence,” he wrote. When contacted, the government of Rio and Cedae informed, in a note, that all versions of the company’s investment policy prioritized “highly liquid and low-risk assets, with profitability close to the CDI, reinforcing the robustness of the cash flow”.

History between Castro government and Banco Master

Contributions from Rioprevidência – The Rio State civil servants’ pension fund invested almost R$1 billion in Master shares, between December 2023 and July 2024. The amount, whose recovery period is uncertain, was the largest allocated to Master, considering the 18 state and municipal pension institutes that also made acquisitions. The purchase of Rioprevidência occurred after the Cedae transactions.

Resignations of directors – In the midst of the crisis generated by the liquidation of Master, under suspicion of fraudulent management, the Castro government started to dismiss former Rioprevidência directors who participated in investments in the bank’s shares. The wave of dismissals intensified after a report from the TCE-RJ highlighted a “remarkable coincidence” between the appointments of these directors and the beginning of contributions to Master.