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Investigators may ask Greece for help in Laiki probe

In a case filed with Nicosia district court, the prosecution maintains that Zolotas’ Focus acted as a front for former Laiki Bank strongman Andreas Vgenopoulos (pictured)

By Elias Hazou

INVESTIGATORS here are said to be considering asking Greek authorities for assistance in probing suspected financial crimes in connection to the transfer of some €1.3bn from Laiki Bank to Greece’s Marfin Egnatia Bank prior to their merger.

The suggestion has been put to the Attorney-general’s office by a lead investigator on the team currently probing the circumstances leading up to the 2013 financial meltdown in Cyprus. Insolvent Laiki was wound down in March last year as part of an international bailout deal.

According to daily Politis, during the course of the probe, police have uncovered that €1.3bn was channelled from Laiki to Marfin Egnatia Bank – controlled by Greek financier Andreas Vgenopoulos – between 2008 and 2011. The two banks merged in 2011.

A report found that, in total, from 2008 to 2011 interbank lending from Laiki to Marfin Egnatia shot up from €1.1bn to €4.6bn, of which €1.3bn in loans were granted in dubious circumstances.

The dodgy €1.3bn loans went to a number of Greek conglomerates, companies and one individual. In the majority of cases, the loans were granted without adequate collateral for the purpose of investing in shares of companies in which Marfin Investment Group (MIG) – also controlled by Vgenopoulos – had a stake.

In some cases the only collateral consisted only of the same shares to be purchased, and in several instances loans were granted to Greek companies in the red, and on favourable terms, including low interest and a long repayment period.

Among the shifty loans granted were €270m to IRF European Finance Investments Ltd for investing in shares of MIG and of the hospital ‘Ygeia’ in Greece.

MIG itself secured a €30m loan to buy shares in Cyprus Tourism and Development Co Ltd (Hilton) and €28.5m for acquiring stock in Christis Dairies.

In effect, the data gathered by investigators map out how Laiki was bled dry during its association with MIG.

A Greek parliamentary enquiry had called attention to “serious conflicts of interest” in Laiki’s Greek operations subsequent to the merger.

It had loaned money to a community of Greek monks involved in land deals and to others who used the money to support a share sale by MIG, a company linked to Laiki through a shared chairman – Vgenopoulos — until November 2011.

It’s generally acknowledged that during Vgenopoulos’ tenure at Laiki there was a relaxing in lending standards in credits made available to Greek businesses with limited guarantees and in some cases with no guarantees whatsoever.

Vgenopoulos, who owned more shares in Egnatia and Marfin than Laiki, oversaw the merger of the three thus having an incentive to overvalue the entities he owned more of (Marfin, Egnatia) at the expense of Laiki.

The triple merger in 2011 maintained the bank’s headquarters in Cyprus, but the decision backfired spectacularly in the summer of 2012 because the Cypriot government had to include the liabilities of the Greek operations when asked to bail out Laiki in the summer of 2012.

In June 2013, a few months after the financial sector crashed, a Cypriot court froze assets worth around €5.3bn belonging to former Laiki Bank strongman Andreas Vgenopoulos and two other people, former Laiki CEO Efthimios Bouloutas and former board member Kyriacos Magiras.

The interim court orders, which have a global reach, were secured by the administrator overseeing the resolution of Laiki.

MIG meanwhile is seeking compensation via an international arbitration tribunal after its 9.5 per cent stake in Laiki in 2006 whittled down to less than 1.5 per cent.


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