BOV exploring fair hearing issues after losing Deiulemar appeal
● €363 million precautionary warrant issued against bank
A precautionary warrant of €363 million has been issued against Bank of Valletta after it lost an appeal in an Italian court yesterday.
The case began after liquidators of the Deiulemar shipping company, together with representatives of 13,000 Italian bondholders, filed the court application against BOV after they lost their life-savings over the scheme dating back to 2014.
The bank, however, is considering bringing up possible fair hearing issues on the basis that almost a third of the small Italian town where the case is being heard are aggrieved bondholders. The €363 million was allegedly held in trusts at BOV by owners of the now defunct shipping giant, Deiulemar, which registered losses of more than €800 million. The company went bankrupt in 2012.
In the wake of the collapse, seven people were imprisoned with the highest prison sentence being a 17-year term.
The shipping line’s owners had allegedly been engaged in assetstripping since at least 2005, through the setting up of numerous companies which were often based overseas.
Profitable assets were sold off, with the proceeds going to the owners themselves rather than to settle the company’s mounting debts. Such practices had ultimately led to the harsh sentences against those involved, but investors are still facing an uphill struggle as they struggle to recover their funds.
Liquidators alleged that BOV allowed Deiulemar owners to set up three trusts, a vehicle for them to illicitly funnel money into. BOV became a trustee for all three: Capital Trust, Trust Gaino and Trust Gilda.
Deiulemar’s insolvency administrators, together with representatives of 13,000 Italian bondholders from Torre del Greco, had filed the court application against BOV after the bondholders found they had lost their life savings and the shipping line’s owners illicitly transferred assets to trusts in Malta, Switzerland, Madeira and the British Virgin Islands.
Possible fair hearing issues
BOV Chairman Taddeo Scerri and CEO Mario Mallia yesterday highlighted possible fair hearing issues, in that the town where the case is being heard, Torre Annunziata, has a population of around 40,000 - 13,000 of which are the aforementioned aggrieved bondholders.
Asked by this newsroom whether the bank would be able to argue a breach of fair hearing in the precautionary warrant appeal issue, they said that there is a court judgement which could open that door, and they are considering the possibility.
While Deiulemar had passed the BOV due diligence back in 2009, it might not have passed today, BOV CEO Mario Mallia said.
Asked by this newsroom about the due diligence process, the BOV heads argued that the due diligence boxes were ticked back in 2009, but stressed that due diligence today is much more stringent than it was back then, and cast doubt over whether the Bank would have gone for that investment today.
In addition, Scerri stressed that the bank went out of the trust business altogether last year, explaining that it is not a profitable enough business for banks to be in, and said that this case had not influenced the decision: “This is the epitome of problems that a business which doesn’t give enough return could bring.”
Addressing a press conference, the CEO, together with Chairman Taddeo Scerri, argued that this was just a preliminary part of the case, and that the actual case still had to be heard.
They argued that they had a very strong case, and that the bank’s operations would not be affected, and that clients, depositors and employees have absolutely nothing to worry about.
They made clear that the bank has no intention of laying off any persons, and that they are in fact recruiting.
They also said that if the bank loses the case, it would just be a drop in the ocean. The bank is confident it will not lose. They said that BOV has a balance sheet of around €12 billion.
They said that the €363 million has been deposited in an Italian bank, but stressed that the money still belonged to BOV, and that any interest being made is being sent to BOV.
On the merits of the case itself, Henri Mizzi, a lawyer for BOV, argued that the bank still cannot understand where the plaintiffs got the €363 million sum from. He said that the bank had essentially acquired the ultimate holding company for Deiulemar back in 2009, which at the time had an estimated value of €363 million, but also had €363 million meant to go to shareholders, so the company was valued at zero, he said. In addition, the bank’s assets had already been sold off.
In reply to questions sent by The Malta Independent, the Malta Financial Services Authority said that, in consultation with the ECB and the Central Bank of Malta, will continue to follow the BOV case, after a precautionary warrant of €363 million issued against the bank was upheld by an Italian Court of Appeal.
“The court ruling was expected even though the final outcome of the case on its merit is yet to be seen. This ruling doesn’t change anything from what has already been disclosed and reported by BOV earlier this year,” the MFSA said.