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Cyprus

Five ex-BoC officials to be prosecuted

Former CEO Andreas Eliades faced charges of authorising the buying of Greek bonds just after the bank had already sold off its previous lot

By Elias Hazou

THE Attorney-general’s office decided yesterday to prosecute five former Bank of Cyprus (BoC) officials, as part of a broader probe into the causes of last year’s financial meltdown.

Those to be indicted are former CEO Andreas Eliades, his successor Yiannis Kypri, former board chairman Theodoros Aristodemou, former vice chairman Andreas Artemi, and former first deputy CEO Yiannis Pehlivanidis, in charge of the bank’s Greek operations.

The bank itself will be indicted as a legal entity.

The decision was reached during a meeting between AG Costas Clerides, his deputy Rikos Erotokritou, lawyers from the Attorney-general’s office and the police team in charge of the criminal investigation.

The precise charges are as yet unknown, but it’s understood that they likely relate to providing false and misleading statements about the bank’s capital adequacy and stock market manipulation – crimes punishable by imprisonment or a fine, or both.

It’s understood the charges draw on earlier findings by the Securities and Exchange Commission (CySEC). In June this year, CySEC slapped administrative fines on 12 former BoC officials for misleading investors through public statements.

The stock market watchdog fined Eliades, Kypri and Aristodemou €530,000 each.

Among other allegations, Kypri reportedly announced on December 10, 2009, that the bank had evaluated Greek bonds as “risky” and intended to divest its holdings.

However, without informing investors, the bank subsequently purchased a large package of Greek bonds. The bonds crashed and burned in 2011 when European Union leaders agreed on a Greek debt write-down. Cypriot lenders lost an estimated €4.5bn as a result.

Speaking to reporters coming out of the meeting, the Attorney-general said the indictments would be filed sometime over the next days.

Clerides also said that investigations into goings-on at Laiki Bank were at an “advanced stage.”

The top lawman hinted that possible indictments relating to Laiki would concern the 2005 to 2013 period.

In 2005, Laiki’s share capital structure underwent a change following the acquisition of a strategic share by Andreas Vgenopoulos’ Marfin and the Tosca Investment Fund, after HSBC’s decision to sell its stake in the bank’s share capital.

Problems in Cyprus snowballed into the winding-down of Laiki Bank under a mountain of debt and a large chunk of deposits exceeding €100,000 being converted to equity to prop up the Bank of Cyprus.

Authorities were forced to seize uninsured deposits at its two main banks in March 2013 to qualify for €10bn in aid from international lenders, the first time bank savers were burned in the euro zone crisis.

The wider police probe spans the years 2006 to 2013. Its scope covers the expansion into Greece, banks’ corporate governance, Cypriot banks’ purchase of junk Greek bonds, and how now-defunct Laiki Bank came to amass some €9bn in emergency liquidity, a liability since passed onto BoC.

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