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Former Laiki CFO says financial results inaccurate

Laiki’s former CFO Annita Philippidou told a court on Tuesday how then-CEO Efthimios Bouloutas thwarted attempts to incorporate into the lender’s financial results a writedown of the its Greek operations in 2011 in the wake of the Greek debt haircut.

Philippidou, testifying for the prosecution, said that at a meeting in Athens on July 7, 2011, Bouloutas insisted that the first restructuring of Greek debt (Private Sector Involvement) in July of that year was “not yet clear” and that therefore the impact on the bank’s balance sheet could not be accurately calculated.

At a new meeting in Athens, on August 24, 2011, Bouloutas and the bank’s then-Chief Risk Officer, the late Demetris Spanodimos, again argued that an impairment of the bank’s goodwill should be left out of the upcoming financial results.

The defendants in the trial are Bouloutas, his deputy Panayiotis Kounnis, non-executive vice-president Neoclis Lysandrou, and executive board member Marcos Foros.

They are facing charges of market manipulation and submitting false or misleading information with regard to publishing an interim financial report in November 2011 in which they omitted to include a goodwill writedown of €330m for Marfin Popular Bank’s – as Laiki was then known – operations in Greece.

Philippidou said that on November 8, 2011 she emailed Bouloutas pointing out that the financial results should include the writedown of Greek debt holdings, given that the second haircut (known as PSI Plus) had been announced on October 27, 2011.

She proposed that the financial results for the first nine months should reflect a goodwill writedown of anywhere from €600m to €900m, as other banks had done.

Bouloutas was against this, responding that the proposed writedown amount was too high.
Meanwhile the bank’s external auditors PwC were calculating the overall writedown of the Greek operations (goodwill plus Greek bond holdings) at €1.126bn.

Because of Bouloutas’ opposition, Philippidou stated, she then proposed a €250m writedown be included in the financial statements. This was admittedly not an accurate reflection, but the amount could be adjusted (increased) later with the publication of the year-end results.

Boloutas then instructed her to prepare the financial statements “in a certain manner” – omitting any impairment of the bank’s Greek debt holdings or goodwill writedown.

He also instructed Philippidou to discuss the matter with the board at a session taking place on November 25 of that year.

According to the witness, she eventually complied with the CEO’s request, but informed Bouloutas that the financial statements would not be consistent with international accounting standards – a view shared by the external auditors.

Philippidou added that due to her disagreement she did not sign off on the financial statements, and was at the time considering resigning from the bank.

Laiki was shuttered amid the banking crisis of early 2013.

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