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KKR’s first Brazilian investment, the 2014 acquisition of data-center company Aceco, was reportedly valued at zero by October 2016. KKR said it believed the sellers had concealed fraud and corruption; Jorge Nitzan’s lawyer said Brazil’s economic collapse, currency depreciation and KKR’s own post-acquisition management damaged the business. The resulting fight involved arbitration against former sellers, court proceedings over control of Aceco and a Brazilian police investigation.
The historical record available from 2016 and 2017 does not establish the final arbitration award, a definitive later court judgment or the disposition of the police investigation. Those outcomes should not be inferred from the contemporaneous reports.
The transaction and the reported write-down
| Item | What was reported | Evidence and qualification |
|---|---|---|
| Aceco acquisition | KKR completed the purchase in 2014 for about $700 million, including debt. | Bloomberg described it as KKR’s first investment in Brazil. |
| KKR investment later reported at zero | KKR’s reported $475 million investment was written down to zero by October 2016. | Bloomberg’s Oct. 13, 2016 report attributed the figure to people familiar with the matter; it was not verified here against a public KKR filing. |
A write-down to zero is an accounting recognition that an investment may no longer be recoverable at its recorded value. It does not, by itself, determine who caused the loss or settle a legal claim. In this case, the accounting report and the legal allegations appeared together but were not the same finding.
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Bloomberg said a KPMG investigation commissioned for Aceco’s board identified alleged misconduct during 2012–2014. The figures below are investigation findings as described by Bloomberg, not findings independently established by a court or arbitral tribunal.
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| Reported finding | Amount or period | Attribution |
|---|---|---|
| Improper payments, including payments to entities described as sham entities tied to government officials | More than 57 million reais (about $16 million), 2012–2014 | KPMG investigation, as reported by Bloomberg in 2016 |
| Revenue allegedly affected by accounting irregularities | At least 37 million reais of 2013 revenue | KPMG investigation, as reported by Bloomberg |
| Revenue allegedly affected by accounting irregularities | At least 102 million reais of 2014 revenue | KPMG investigation, as reported by Bloomberg |
| Aceco’s reported net revenue for 2014 | 682 million reais | Aceco’s reported result, as described by Bloomberg |
Bloomberg also reported allegations that charges were allocated to existing work, including projects connected with the 2014 FIFA World Cup; margins were inflated on at least two major projects; overruns were shifted from over-budget assignments to under-budget ones; and revenue was accelerated without justification. KPMG’s reported conclusion was that the alleged misconduct was systemic because senior management was involved and the activity touched major projects. KPMG declined to discuss specific findings because of client confidentiality, and Bloomberg said Aceco’s representative and Nitzan’s lawyer did not comment on those findings.
Bloomberg further reported that Deloitte later withdrew support for the validity of Aceco’s reported 2013 and 2014 results in an Aug. 25 notice on Aceco’s website. That report does not, by itself, establish liability or prove every allegation in the KPMG account.
The two explanations for the loss
| Question | KKR’s position | Nitzan’s side |
|---|---|---|
| What caused the investment to fail? | KKR said it believed the sellers had defrauded it and that former management committed fraud and corruption that were not disclosed before the sale. | Maria Cristina Cescon, Jorge Nitzan’s lawyer, said the purchase occurred just before Brazil’s catastrophic economic and government crisis, with significant currency depreciation, and that KKR’s post-acquisition management worsened the result. |
| What remedy was sought? | KKR pursued recovery of losses and sought to undo or reverse the transaction through arbitration against former sellers. | Nitzan’s side rejected KKR’s attempt to shift responsibility for a badly timed acquisition and disputed KKR’s explanation. |
| What kind of evidence was available? | Reported KPMG findings, the reported Deloitte withdrawal and KKR’s own allegations. | Statements from Nitzan’s lawyer emphasizing macroeconomic conditions and management decisions. |
KKR’s emailed statement, reproduced by Bloomberg, said: “We believe we were defrauded by the sellers of Aceco and are seeking to recover losses related to fraud and corruption by former management of the company.”
Cescon wrote that KKR bought control just before Brazil’s economic and governmental meltdown and the currency’s significant depreciation, adding that the timing was worsened by post-acquisition mismanagement and that KKR was trying to blame others for a mistimed purchase. These are the parties’ competing positions, not a judicial determination.
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How the legal disputes were separated
Arbitration against former sellers
KKR pursued arbitration against former sellers, including General Atlantic and members of the Nitzan family. Its case alleged that accounting fraud and other misconduct had not been disclosed before the 2014 sale. Contemporary reporting said KKR sought recovery or reversal of the transaction. A request to freeze Nitzan-related assets was reportedly denied while the arbitration continued.
Court fight over control and debt
A separate dispute concerned who controlled Aceco. Reuters reporting republished by Investing.com described KKR’s acquisition vehicle, Auckland, its debt payments to Banco Bradesco and Nitzan’s purchase of most of that debt. By enforcing the acquired debt, Nitzan reportedly regained control. Exame reported in November 2016 that a court ordered KKR back to managing Aceco. That order describes a contemporaneous development; it does not establish the company’s later or present ownership and control.
Brazilian law-enforcement inquiry
Bloomberg reported that Brazilian law enforcement opened an investigation after a whistleblower approached police. The available account gives no final finding, charging decision or other disposition.
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Timeline of the Aceco dispute
- 2014: KKR completed the Aceco acquisition, reported by Bloomberg at about $700 million including debt.
- May 11, 2015: According to Bloomberg’s account of the KPMG investigation, KKR Latin America head Jorge Fergie received an anonymous email alleging manipulated accounts and bribes to officials.
- November 2015: A second whistleblower reportedly came forward.
- 2016: KKR pursued arbitration against former sellers and sought relief connected with the alleged undisclosed fraud. Reporting also described the rejected asset-freeze request.
- October 2016: Bloomberg reported that KKR had written down its investment to zero and described the competing fraud, economic and management explanations.
- November 2016: Exame reported a court order returning management of Aceco to KKR after Nitzan had regained control through acquired debt.
What the 2016–2017 reporting does—and does not—show
- The reported zero valuation was an investment write-down, not proof that an arbitral tribunal had ruled for KKR.
- The KPMG and Deloitte accounts were reported investigative and audit developments; the materials available here do not turn them into final court findings.
- Arbitration over alleged seller nondisclosure, court proceedings over control and debt, and the police investigation were distinct processes.
- No authoritative later award, final court judgment or police-investigation disposition was established in the available record. A present-day account would need a current primary record or reliable later reporting.
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