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Cyprus

Issuing profit warning ‘vehemently opposed’ court hears

Former chairman of Bank of Cyprus Andreas Eliades

Former Bank of Cyprus CEO Andreas Eliades was vehemently opposed to the issuance of a ‘profit warning’ and even board-level discussion of the issue, former deputy CEO Yiannis Kypris told a court on Tuesday.

In addition to Eliades, Kypris and the bank itself, former board chairman Theodoros Aristodemou, his successor Andreas Artemis, and head of Greek operations Yiannis Pehlivanides are facing trial over the failure to disclose the lender’s true capital shortfall in June 2012.

The BoC’s board had announced a month earlier it was undercapitalised by €200 million but the prosecution asserts that it purposely avoided informing the public that, by June, it had nearly doubled.

The defendants claim that no concrete evidence confirming the hypothesis had been available at the time as well as that a number of options then available to the board, including the sale of the group’s insurance companies or issuing new debt, might have remedied the undercapitalisation in time.

During cross-examination by state prosecutor Polina Efthyvoulou, Kypris described how he had been “relegated” in September 2009 from head of Finance and Risk Management.

Following the top-management shake-up, he added, CEO Eliades had close oversight of Financial Management and the Risk-Management committee.

In 2005, Kypris had been appointed the group’s general director, third-in-line of the group’s Executive Committee after Eliades and deputy CEO Charilaos Stavrakis.

This committee, he claimed, underperformed due to Eliades’ meddling with the other two members’ duties.

With regard to a contentious board meeting on June 14, 2012, Kypris said Eliades had been strongly opposed to both issuing a profit warning and even discussing the issue at the board meeting.

He recalled an incident at the board meeting where then CFO Christis Hadjimitsis tried to broach the issue only to be cut off by Eliades who said “I told you there is no need, why do you bring it up again?”

According to Kypris, then chairman Aristodemou had sided with Eliades, who told Hadjimitsis “we are done. Thank you very much. You may go.”

Eliades appeared to have justified his view with assurances he had received from then senior director Nicolas Karydas regarding available options for recapitalisation by end-June, an argument Kypris said he had “no reason” to dispute.

Kypris said he, too, believed ongoing efforts to cover the capital shortfall by end-June would bear fruit.
He told the court that until June 25 he had seen no documentation or data suggesting a need for issuing a statement notifying the bank expected a higher shortfall.

“Such a statement would be incomplete and misleading, since during this period everything pointed to the view that, one way or another, the bank would cover its shortfall,” he said.

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