National bank faces hit Maple Group tax issues worrying investors

• Legal problems facing the European subsidiary of Maple Financial Group is creating uncertainty for two of its largest investors — the Ontario Teachers’ Pension Plan and the National Bank of Canada.

National Bank says its investment — which had a carrying value of $165 million as of Aug. 31 — was at risk of big losses because of allegations of tax irregularities between 2006 and 2010 in Germany against Maple Bank GmbH.

“Given the seriousness of the reported allegations and the actions which may be taken by German regulatory authorities ... National Bank considers its investment at risk of substantial loss,” Canada’s sixthlargest bank said in a news release.

The bank holds a 24.9 per cent interest in Toronto-based Maple, just behind the 28 per cent stake held by Teachers’, the country’s third-largest pension fund manager.

Vancouver’s Chan family owns 29 per cent, while Maple management and employees hold 13 per cent, with the remaining five per cent scattered among a number of investors, according to Maple’s financial report.

Teachers spokeswoman Deborah Allan said the fund manager was “closely monitoring any developments, but (we) are not commenting on the investment.”

Maple Financial Group is unrelated to Maple Acquisition Group, which bought the TMX in 2012.

Founded in 1986, Maple Financial changed its name in 1997 from Financial Products Group of First Marathon Inc. It had 3.75 billion euro of net assets as of Sept. 30, 2014.

The Office of the Superintendent of Financial Institutions (OSFI), which regulates federally registered banks, trusts and private pension plans, said it was aware of Maple’s situation but was not permitted by legislation to say if it was investigating.

National added Maple in 1999 as part of its $712-million acquisition of brokerage firm First Marathon. It was merged with National subsidiary Levesque Beaubien Geoffrion Inc. to form National Bank Financial.

The bank issued the warning about its Maple investment Thursday afternoon as it announced a restructuring that will see the elimination of several hundred jobs, mainly in Quebec.

It also announced that it expects to raise $300 million in gross proceeds after issuing 7.16 million shares to a syndicate of underwriters led by National Bank Financial.

“In an environment of low economic growth and high technological transformation, we feel that additional efforts to improve efficiency and processes, as well as adding to our excess capital cushion, are the right steps to take,” said CEO Louis Vachon.