Cyprus Mail
Cyprus

Court says CySEC officer’s evidence ‘inadmissible’ in BoC probe

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 Staff Reporter

THE Nicosia criminal court on Thursday ruled as inadmissible a large chunk of the testimony of a Securities and Exchange Commission (CySEC) officer against the Bank of Cyprus, deeming parts of it as either unacceptable or immaterial.

In its interim decision, the court said that much of the testimony provided by CySEC officer Alkis Pierides, who was part of the team that investigated the bank on suspicion of market manipulation, did not hold up.

The testimony struck from the record includes Pierides’ account of CySEC’s prior administrative actions and decisions regarding the Bank of Cyprus (BoC), which the court found to be “irrelevant.”

Other material not deemed admissible were the witnesses’ analysis of terms such as ‘inside information’ and ‘manipulation’. The court said Pierides did not prove he had the requisite expertise to interpret these terms, and that therefore in using them he was merely expressing an opinion.

The court also threw out a number of documents which Pierides presented, as their provenance had not been established, save for documents for which it was demonstrated they had come from the bank, like the minutes of board meetings.

At the same time, the three-judge bench rejected a motion to strike written representations made by the bank to CySEC, on the grounds that the bank incriminated itself in providing this material.

The court said that, under the law, the bank had the right, not the obligation, to respond in writing to CySEC’s investigative queries, and as such no one forced it to do so.

However, in the case of the five senior bank officers, who are also on trial along with the lender itself, the court did find that they had been forced to make representations to CySEC.

“Should they have done nothing to prove their innocence, essentially they would have had an administrative fine imposed on them, and in this sense they were forced to make those representations,” the court noted.

It also pointed out that CySEC had conducted an investigation first, found the bank and its officers guilty, and then began asking questions of the accused.

The trial resumes on Wednesday, September 16.

Five of the bank’s former senior officials, as well as the lender itself, are accused of deliberately misinforming investors with regard to the bank’s capital position in 2012.

In addition to the Bank of Cyprus, indicted are former CEO Andreas Eliades, his successor Yiannis Kypri, former board chairman Andreas Aristodemou, former vice chairman Andreas Artemi and former first deputy CEO Yiannis Pehlivanides.

The indictments draw on a November 2013 decision by CySEC, which had fined the bank as well as Eliades, Aristodemou, Kypri and Pehlivanides, having found them guilty of misleading investors.

According to CySEC, the bank told shareholders in its annual general meeting (AGM) in June 2012 that it needed to cover – through private funds – a shortfall of €200m to comply with regulatory capital requirements.

But soon afterwards, on June 27, the bank requested €500m in state assistance after failing to raise the necessary capital to meet a regulatory shortfall because of increased provisions and its exposure to Greek bonds.

CySEC said the bank’s capital needs had doubled to about €400m, which should have been announced on June 15.

The AGM was held on June 19, and shareholders would have had until June 15 to submit any questions in writing prior to the AGM.

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