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Court finds former Bank of Cyprus chief guilty (Updated)

Former BoC CEO Andreas Eliades

The Nicosia criminal court on Thursday found Bank of Cyprus (BoC) and its former CEO Andreas Eliades guilty of the charge of market manipulation through misleading statements to investors about the lender’s capital shortfall in June 2012.
The other defendants – former deputy CEO Yiannis Kypri, former board chairman Theodoros Aristodemou, his successor Andreas Artemi, and head of Greek operations Yiannis Pehlivanides – were cleared of all charges.
Eliades and the bank as a legal entity were found guilty of providing misleading information to investors during the bank’s annual general meeting (AGM) of shareholders on June 19, 2012.
The misleading statements related to the bank’s capital shortfall at the time.
At the AGM in question, it was claimed the bank was close to full recapitalisation and that the capital shortfall was at €200 million.
But in a letter to then-central bank chief Panicos Demetriades, dated June 20, 2012 – one day after its AGM – the bank raised its capital needs to approximately €400m.
In its 250-page verdict, the court said Eliades knowingly misled the bank’s shareholders at the AGM.
“Undoubtedly he was aware that his comments [about the capital shortfall] were unfounded, and we have no doubt that, despite knowing his comments were groundless, he referred to a deficit of €200m.
“In this way, he misled the shareholders and in general those in attendance at the AGM (as well as the public), relaying to them false data and leading them to make erroneous conclusions and imparting to them a false perception of the situation which obtained at the time in relation to the bank’s deficit.”
The decision added: “It is, we believe, a matter of common sense that had Mr Eliades wanted to correctly and honestly inform the AGM, he could very simply have explained…the true state of affairs, mentioned the difficulties which had already been discussed at the board, and cited the unknowns.”
The court contrasted Eliades’ conduct before the bank’s shareholders to his actions on the very next day.
“On the morning of the following day, the accused no.4 [Eliades] wrote to the Central Bank governor, and one justifiably wonders why he could not have provided the same briefing/assessment to the shareholders and investors.
Essentially he disseminated information which provided misleading indications, which were clearly and materially connected to the stock value of the accused no.1 [Bank of Cyprus]. No other explanation can be found as to the reason why he did so, other than he did not wish at that moment in time [during the AGM] to portray the real situation, nor to make public the difficulties which existed.”
Rather, the court said, Eliades sought to reassure all those present and ‘to avoid any negative reactions or moves on their part in the market’.
It added: “From the entirety of the testimony before us, we are left with no doubt that at the material time Eliades was among those officers who were a controlling/directing mind of the bank.”
At the same time, the court acquitted Eliades of another charge – that of withholding material information regarding the lender’s capital shortfall in his capacity as CEO.
On December 20 the court will hear arguments in favour of mitigation for Eliades and the bank prior to sentencing.
Eliades was forbidden to leaving the country until then.
Market manipulation carries a sentence of up to 10 years imprisonment, a fine of €100,000, or both.
The other defendants were cleared of the charge of market manipulation charging that between June 14 and 26, 2012, while members of the board of directors, they failed to take the appropriate actions so that the bank would have announced a ‘significant event’, that is, that its capital requirements had risen considerably.
On this, the court said the prosecution had failed to meet the standards of proof in a criminal case in connection with the argument that, at any time prior to June 26, the defendants could have specified the bank’s capital shortfall at approximately €400m.
Bank of Cyprus and Aristodemou were also cleared on the charge of manipulating the market between June 19 and 26 in Nicosia. They were accused of disseminating information at the AGM giving misleading indications about the bank’s capital shortfall.
Aristodemou was likewise found not guilty on the charge that, in his capacity as chairman of the board, he withheld material information from shareholders at the same AGM.
The case was filed with Nicosia district court in December 2014, and referred to criminal court in January 2015. The trial proper began on February 27, 2015.
In an interim ruling in April 2016, the criminal court had cleared all five defendants of the charge of conspiracy.
This being an election cycle, political parties felt compelled to issue statements on the verdict of the case, seen as linked to the events leading up to the 2013 financial meltdown.
“The decision is a provocation to the public’s sense of justice,” the Greens said.
A second trial against Bank of Cyprus and top executives is ongoing. It concerns the lender’s acquisition of Greek government bonds and its failure to inform shareholders of the dangers of the investment.
In this separate case, with a different set of circumstances, the supreme court recently ruled that market manipulation cannot stand as a charge against four defendants.
The state legal services have since appealed the supreme court decision.
Eliades is among the defendants who also face charges of perjury.

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