Cyprus Mail

Contractor questions ‘haircut’ timing of Christofias payment

Demetris Christofias with Miltiades Neophytou

Former President Demetris Christofias paid Miltiades Neophytou’s construction firm €100,000 in cash in April 2013, days after banks re-opened in Cyprus in the wake of the Eurogroup decisions that imposed a ‘haircut’ on uninsured deposits in the island’s two largest lenders, the contractor told the court on Monday.

At the time, the entire banking system was restricted by stringent capital controls.

Neophytou took the witness stand for cross-examination by Christofias’ lawyers in a civil lawsuit he filed against the former president – and his former close friend – in which he is demanding the return of more than €22 million.

The contractor claims to have spent some of the money on renovating Christofias’ Makedonitissa residence and Kellaki holiday home, as well as the offices he selected to house his presidential bid in 2007.

But the bulk of the money Neophytou is demanding was spent on Akel-controlled Omonia football club, of which the contractor was placed at the helm by Christofias from 2008 to 2012.

The contractor claims he spent the money on the strength of Christofias’ word – “he was the president and I was following his instructions,” he told the court.

In Monday’s hearing, Christofias’ lawyers tried to discredit Neophytou by suggesting his assertions only came up after he drove his company into the ground.

The contractor responded by producing a document showing a summary of his company’s financials from 2005 to 2012, according to which the firm grew progressively year-on-year, with modest increases on its financing cost – meaning interest charged by banks.

But in 2012, the document showed a staggering contraction in its operations and personnel, which the contractor attributed to the onset of the financial crisis, and a wild jump in financing cost – from little more than €150,000 in 2005 to over €3.5 million in 2012 – and an annual net loss of €3 million.

He claimed the spike in interest payments was due to continued overdraft extensions in his company’s bank account, facilitated by Christofias in collaboration with the Bank of Cyprus, so that cash injections into Omonia, the success of which the former president viewed as a proxy to his presidency’s success, could be made.

“We might have had an €8-million overdraft limit at any given point, and cleared cheques took it to €15 million,” Neophytou said.

“Why would a bank do this? Time and again, these [extensions] were orchestrated by Demetris Christofias.”

The contractor then went back to a claim he made during the last hearing, that, out of a total in excess of €1.5 million owed to him by Christofias for work done on his houses, the former president paid him only €270,000 in three instalments.

“I’d like to let the court know some information I only found out recently,” Neophytou said.

“This money was paid to me in three instalments: the first two of €100,000, and the third for the rest. But I have to tell you this: the girl at my company’s accounting department votes for Akel, and she was pressured into backdating the receipts. So the payment dates I gave you last week are wrong.”

It turned out that, according to Neophytou, Christofias paid €100,000 in cash on April 12, 2013, while the receipt was backdated to January 2, 2013.

The second instalment was a cheque paid on May 31, 2013, and the receipt backdated to January 31, 2013.

The dates for the third instalment, Neophytou said, seemed OK.

“€100,000, in cash, in April 2013,” he repeated.

“In the midst of the haircut.”

Banks in Cyprus re-opened after the mid-March 2013 meltdown on March 27 with cash-withdrawal restrictions of a maximum €300 and €500 per day for personal and company accounts, respectively.

Neophytou referred again to a €2-million loan approved for Omonia by RCB bank in 2011, apparently following a phone call by Christofias to CEO Kiril Zimarin, linking it to a pledge he claimed Christofias made to “the Russians at RCB” to hand them a casino licence.

“Mr Panicos Papanicolaou, who is a Cypriot expat in the USA, and whom I met through Christofias, called me one day to say that in a meeting with Demetris Christofias he was promised the casino licence,” Neophytou said.

“I met him at the Hilton and he told me of an exchange he and the president had. I then called Christofias to confirm, and he said everything Papanicolaou had told me was true.”

Papanicolaou, the contractor added, then asked for Neophytou’s help, revealing that former permanent undersecretary of the foreign ministry Sotos Zakheos, now RCB’s executive director, was “directly involved”.

Neophytou’s help came in the form of a suggestion for the International Conference Centre, a Nicosia complex which his company had been renovating ahead of Cyprus’ taking over of the presidency of the European Council in 2012, as a possible site for the casino.

Papanicolaou and Zakheos visited the site, agreeing it was well-suited to host a casino, and days later “the Russians of RCB” – whom Neophytou did not name – showed up to survey the space.

“That’s about the time when the RCB loan came through for Omonia,” the contractor said.

“And when it became obvious there would be no casino licence, I had Papanicolaou and Zakheos chasing after me, complaining that Demetris Christofias had tricked them.”

In a statement after the hearing, RCB rejected Neophytou’s claims and said it “never showed an interest in the casino business”.

“It suffices to mention that RCB Bank was not part of any consortium that took part in the process for obtaining a casino licence, let alone during the previous one, since it is well known to everyone that the Christofias government was against the operation of casinos in Cyprus,” it said.

In 2009, Christofias ruled out the possibility of allowing the creation of a casino in Cyprus under his watch on moral grounds, a position reversed in 2011, when finance minister proposed it as an economy-boosting measure.

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