Former CEO of the Bank of Cyprus Andreas Eliades was sentenced on Friday to 2.5 years in prison while the lender itself was slapped with a €120,000 fine after being found guilty by the Nicosia criminal court of the charge of market manipulation through misleading statements to investors about the bank’s capital shortfall in June 2012.
Eliades and the bank as a legal entity were found guilty of providing misleading information to investors during the bank’s annual general meeting (AGM) of shareholders on June 19, 2012. The misleading statements related to the bank’s capital shortfall at the time.
At the AGM in question, it was claimed the bank was close to full recapitalisation and that the capital shortfall was at €200 million.
But in a letter to then central bank chief Panicos Demetriades, dated June 20, 2012 – one day after its AGM – the bank raised its capital needs to approximately €400m.
In its 250-page verdict, the court said last month that Eliades knowingly misled the bank’s shareholders at the AGM.
The criminal court president, Lena Demetriadou, said on Friday that if Eliades had wanted to inform the bank’s shareholders and investors he could simply have explained the real situation and unknown factors, just as he did the next day in his letter to the then central bank chief.
The court, judge Demetriadou said, did not agree with the suggestion made by Eliades’ defence lawyer that he just ‘blurted out’ the unfortunate answer without thinking.
The court came to the conclusion, she said, that the then CEO of the bank did not want at that time to paint the true image, but on the contrary, he wanted to reassure everyone.
Referring to UK case law for penalties in similar cases, Demetriadou said that ‘high levels of integrity, adherence to high standards of impartiality and transparency and above all honesty’ are expected from high-ranking officials of lenders.
The shareholders and investors, the court said, had the right to be informed of the state of affairs of the bank.
“The severity of this offence lies in exactly the deprivation so lightly of this right,” the court said.
The court initially mentioned the offense of manipulation and the fact that it is a diversion of the share price formation process, as well as the importance attached to the smooth functioning of the markets as a prerequisite for economic growth and prosperity.
It said that it is of paramount importance to ensure the integrity of the markets for financial instruments, to maintain public confidence in the markets and to ensure full transparency.
The court however, said that it was ‘unfortunate and sad’ that the media presented the case as a case involving the destruction of the Cypriot economy and the accused as guilty.
The other defendants – former deputy CEO Yiannis Kypri, former board chairman Theodoros Aristodemou, his successor Andreas Artemi, and head of Greek operations Yiannis Pehlivanides – were cleared of all charges last month.
The case was filed with Nicosia district court in December 2014, and referred to criminal court in January 2015.
A second trial against Bank of Cyprus and top executives is ongoing. It concerns the lender’s acquisition of Greek government bonds and its failure to inform shareholders of the dangers of the investment.
In this separate case, with a different set of circumstances, the supreme court recently ruled that market manipulation cannot stand as a charge against the four defendants. The state legal services have since appealed the supreme court decision. Eliades is among the defendants, who also face charges of perjury.