IT WAS NOT only Alvarez & Marsal that had been demanding a success fee – previously known as a recap fee – for the disaster that is the Cyprus banking sector.
The man, who made a pretty big personal contribution to this disaster, CBC Governor, Professor Panicos, has also put in a claim for a success fee in the negotiations with the government over his resignation.
During the meeting he had with the under-secretary to the president, 10 days ago, in the presence of his lawyer, the professor, according to our information, asked for a €1.6 million compensation in order to resign and spare the government the trouble of trying to remove him by legal means. This was the amount he was demanding to step down at the end of December; if he left now he wanted more.
If he was paid the full value of his contract, which ends in April 2017, he would have received between 500 and 600 grand, so the extra million he asked for must have been his idea of a ‘success fee’. And as we have found out this week, in financial circles, no success is necessary for someone to claim a success fee.
In the case of Panicos ‘a dismal failure fee’ would be a more apt description for the extra money he was demanding.
TO BE FAIR, the €1.6m was just the professor’s starting position in the compensation negotiations with the government; he knew that he would eventually settle for less, but starting high would ensure he received a few hundred grand as a success fee.
When the story about the A&M contract he had signed, agreeing to the payment of a success fee, was reported on Wednesday and there were rumours that the CBC board would ask for his resignation, the generous professor allegedly called his source in the government and offered a discount of about 40 per cent for his resignation.
He was willing to go for just a million. He allegedly offered another discount, going down to a six-digit figure, as the revelations about his bungling piled up, but the compensation option was no longer on the table.
Our mole at the presidential palace informed us that when Prez Nick was informed about the professor’s money demands, he had a fit. Fortunately there were no ash-trays within his reach. The raging Nick’s response to the governor’s greed was, reportedly, ‘I will not give him a cent.’
The professor had messed up once again, but it was pleasing that this time he would personally suffer the consequences of his bungling, which normally are only felt by the economy.
WITH COMPENSATION no longer on the table, we will now be hearing the professor defiantly declaring he will not resign. Last weekend he gave an interview to the Financial Times in which he said he would not resign because “I do not think it would be the right thing to do.”
Interestingly, whenever his relationship with the prez takes a turn for the worse, Panicos calls the FT and offers to give it an interview. This was the third, in the space of a few months, but it would appear the professor regretted giving it.
On Sunday night the CBC issued a statement to inform us that the interview had been given to the FT several days earlier, on the previous Tuesday. Why did this matter? It was obviously a message to the government that he had not given up his offer to resign.
He wanted it made clear to the government that he gave the interview to the FT, three days before he had met the under-secretary to discuss his compensation package and that his pledge to stay in his post was no longer valid. The government needed to know that he now believed resigning was the “right thing to do”, as long as he received his €1.6m, that is.
BY THURSDAY, when it became apparent the offer of compensation no longer stood, and that his bungling of the A&M contract would not go away, the professor reverted to his defiant rhetoric and proved the truth of Dr Johnson’s observation that patriotism is the last refuge of the scoundrel.
He described the issue of his resignation in an interview with Politis published on Friday, as a “constitutional deviation and violation of article 130 of the (European) Treaty that could lead Cyprus to the same adventures as Hungary.” Like all bash-patriots, he would stay in his post for the good of the country. “I consider it a duty to the country not to resign under such conditions of pressure,” he said.
His patriotism did not end there. In an announcement about the A&M deal, by which he agreed to pay the firm a ‘success fee’ that would be a percentage of the amount needed for the recapitalisation of the banks (later denied), the CBC said that press reports were “part of an orchestrated campaign by certain groups to compel the resignation of the Governor or to promote the interests of Alvarez & Marsal.”
PANICOS is a true Akelite in his relationship with the truth – he awarded A&M several contracts worth tens of millions, he agreed to a success fee and kept the board of the CBC in the dark about it, he agreed to changes in the letter of engagement that benefited A&M and he approved the €4.75m claim, but accuses others of promoting the firm’s interests.
With the patriotic Panicos as governor A&M does not need anybody else to promote its interests in Kyproulla. Incidentally, did A&M also receive a success fee when the professor sent the firm to negotiate the sale of the operations of the Cypriot banks in Greece and ended up selling them a couple billions below their value?
In the same statement the CBC also censured the leaking of confidential CBC documents, which constituted a criminal offence. Getting sermons from Panicos about the leaking of information is a bit like an alcoholic giving lectures against drinking.
UNDER the professor’s guidance, the CBC’s press office has become a very reliable source of misinformation. On Thursday night, it told reporters that A&M had cut is success fee claim to €1.5m implying that this was big success for the professor.
It also issued an announcement which said that “Alvarez & Marsal, in a letter sent to the CBC today, states that at the time of the agreement there was never any intention of requesting compensation from the bail in and this continues to be the firm’s position.”
We were told only what suited the governor. When the letter was leaked on Friday the scale of the misinformation was evident. Hal Hirsch, Head, Global Asset Risk Services of A&M, disagreed that there was no legal justification for the payment of the success fee, insisting there was a “clear legal entitlement to a success fee”.
Sent on October 23, the letter made no mention of being ready to settle for the amount mentioned by the CBC the following day. “Importantly, the proposal for €4.75 million, stated in our 19 September 2013 correspondence was within the range we were advised by the Governor would be appropriate,” wrote Hirsch.
Why had he okayed the amount, if A&M were not entitled to it? Had he been “under duress” to give his consent as he claimed he had been before signing the letter of engagement that included the success fee? In fact he had said A&M coerced him to sign, by threatening to stop offering their services, immediately after the bail-in, a critical period for the banks.
He subsequently said he had not been coerced to sign contract, but was operating under “pressing conditions”. Does anyone believe anything this sad joke of a governor says? Yes, the members of ECB and European Commission still take him seriously, because they would defend Idi Amin if he was a Central Bank governor, as a point of principle.
THE DEAR old Bank of Cyprus has finally managed to hire a CEO. Irishman John Hourican is a high-flyer who was CEO of the markets and international banking division of the Royal Bank of Scotland from 2008 until 2013, when he was forced to resign as a result of the Libor-fixing scandal.
He was a super-signing for the BoC, which is in desperate need of strong leadership. Hourican takes over his new duties next week and our establishment is already taking bets on how long he will last in the job, working under a long-haired chairman, having to deal with a power-mad union boss and having to cope with non-stop interference by politicians. If he is here for the sunshine and because Kyproulla is a good place for people with young kids, he could last longer than we think.
And his remuneration package, which is guaranteed to anger the media, has not yet been announced. But if he can save the BoC he deserves top footballer’s pay. The Daily Telegraph web-site carried a story about Hourican’s appointment and almost all the readers’ comments were negative. Someone calling himself Needaspliff wrote the following unflattering comment:
“At least we have the Bank of Cyprus to thank for getting this corporate banking hooligan out of the UK.”
THERE was one positive outcome from the collapse of Laiki Bank. The Radiomarathon – the three-day orgy of self-satisfaction and self congratulation because we give a few euro for children with special needs – has been completely scaled down by the BoC, which, like the €9.6bn ELA, it inherited from Laiki.
It also helped that the CyBC was no longer involved as the corporation, for the three days of the Radiomarathon, would broadcast nothing but nauseating, didactic shows about love and compassion. Last week there were a lot fewer, irritating bank employees collecting money in the streets and the charity raised significantly less money than Professor Panicos would receive in salaries until the end of his contract.
The charity raised a paltry 400 grand, down 700 grand on last year. Then again why would anyone give money to a bank that raided his deposits, for a charity set up by bank of shysters that collapsed wiping out the savings of all its customers?
WE HAVE something to look forward to this week. The IMF’s delightful and delicate Delia will be back in town to brighten up our TV screens and give us a reason to watch the television news once again, just to get a glimpse of her regally walking into the finance ministry.
The second review of the assistance programmes is unlikely to go as well as the first, but who cares. At least next week the coffee-shop will be able to write about Delia rather than Panicos, and our skettos-drinking customer Solomos, will hopefully stop moaning about the boring content we have been serving him.