By Elias Hazou
THE report into the Dromolaxia investment hints at a network of personal connections which made the deal possible. In late 2009 Christakis Gerasimou, an investment consultant, was approached by Nicos Lillis, the main shareholder of Wadnic Trading, the company developing the Dromolaxia project.
Gerasimou testified that Lillis asked that he put him in touch with then CyTA chairman Stathis Kittis so that he could pitch the investment idea. Lillis informed Gerasimou that the land plot in question belonged to a Turkish Cypriot, but added that there would be “no problem with transferring the permit.”
In late 2009 Gerasimou set up a meeting between Kittis and Lillis. According to Gerasimou, Lillis’ initial proposal to the CyTA pension fund was for €40m. During the course of another meeting, between late 2009 and early 2010, Lillis said that once the deal was clinched he would give them each (Gerasimou and Kittis) €1m.
In its report, the committee of inquiry said it found Gerasimou’s testimony before it “interesting” for another reason, namely, that it strongly suggests Lillis was personally acquainted with the then head of the Town Planning Department, Christodoulos Ktorides.
According to Gerasimou, in late 2009 Lillis appears to have personally interceded with town planning so that CyTA’s Kittis could secure a zoning change for a land plot he (Kittis) owned in Larnaca.
Kittis had for some time been seeking a derogation from town planning in order that a road be built around his land plot. In late 2009, Lillis – who became aware of Kittis’ issue – interceded on Kittis’ behalf with Ktorides, and just a month later town planning gave the go-ahead for a road to be built around the land plot.
“Lillis’ intervention was crucial in resolving the problem which Mr. Kittis had been facing,” the report notes.
“Based on this,” it adds, “the committee cannot rule out the possibility that the favourable treatment and speed which with the whole matter was handled is connected to the fact that Mr. Nicos Lillis was behind the company.”
The committee said also that this derogation granted to Kittis – a derogation that appears not to have been justified – merits “further investigation by the competent authorities into the possibility of any offences.”
Elaborating on the running of CyTA’s pension fund in general, the report finds that the fund’s administrators “were accountable to no one, nor were their decisions and actions subject to any audit, internal or external.”
“Non-transparent procedures were followed to select investment and enter into contracts, lacking consistent assessment and selection criteria,” the lengthy probe notes.
“Usually it was the same persons on all levels who were actively involved [with investments], without the possibility of internal or precautionary checks. This effectively ruled out the possibility of checks even after the fact,” the report states.
Investment decisions were often taken in a seemingly capricious fashion. The pension fund did not invite expressions of interest (bids), nor did it assess investment offers in any methodical manner. And routine due diligence, such as market research or technical-financial studies by investment consultants, were typically not carried out.
More often than not, the fund’s administrators “ignored” the recommendations of their consultants, ΑΟΝ Hewitt. Repeated warnings of the risks of concentrating investments in real estate, and advice to diversify investments, fell on deaf ears, the report said. With the drop in real estate prices, the value of the fund’s investments has diminished.