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Ayia Fyla loan scam suspects remanded (updated)

Limassol court

Sixteen suspects arrested in connection with a loan scam worth around €12 mln at Limassol’s Ayia Fyla co-op bank were remanded in custody for seven days on Wednesday morning.

The remand hearing started on Tuesday and went on for nine hours before the court adjourned at around 8pm, reserving its decision for Wednesday.

Later on Wednesday, police arrested a property valuer who was one of three suspects still sought in connection with the case.

Warrants were issued for a total of 19 individuals: two business people, two of their former employees, five former co-op members and three former members of its committee, four property valuers, and three relatives.

The case concerns the approval of 11 loans worth €11.9 million between 2007 and 2009.

Loans were granted without the necessary collateral, property was overvalued, there were unjustified deposits to accounts, and even prostitutes were used to get people to sign as guarantors.

Committee members allegedly acted on behalf of the two businessmen, approving loans without the required collateral, while valuers overvalued property to secure loans bigger than the value of the mortgage.

In one instance, the court heard, two valuers set a property value at €1.1mln while its real value, according to the land registry, was €307,000.

Another property was valued at €1.6m instead of €297,000.

People with financial or psychological problems, often on allowances, were paid or offered other things in return for their signature as guarantors.

The documents were later changed, making them the primary debtors without their knowledge.

Money from the loans ended up in the businessmen’s personal and company accounts. The co-op officials who mediated were rewarded financially.

Police are currently investigating 71 bank accounts, some with deposits that cannot be justified, according to the investigator.

Auditor-general Odysseas Michaelides said there were at least six more cases dating back between 2006 and 2009 that warranted a police investigation.

Michaelides said there are reports “from the co-op audit service, which carried out the audits before, that record similar high-risk cases to the Ayia Fyla one.”

The auditor said the co-op management should go through the cases one by one to see whether these should be handed over to police.

The six cases concern various co-ops before the sector was nationalised as part of the island’s international bailout in 2013.

The sector has been reduced in size through mergers, which saw 93 co-operatives merged into 18. The mergers were completed in 2014.

Co-ops are one of four systemic banks on the island along with Bank of Cyprus, Hellenic, and RCB. All four are now under the direct supervision of the European Central Bank’s single supervisory mechanism.

 

 

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