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Archive for May, 2019

Landsbanki Luxembourg equity release loans – again in Paris Court

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In August 2017, French prosecutors lost their criminal case against ex Landsbanki chairman of the board Björgólfur Guðmundsson* and eight former employees of Landsbanki Luxembourg. These nine were charged in relation to the bank’s equity release loans. The prosecution won an appeal and the case is now in court again at Palais de Justice, expected to run into June.

Over the last few decades, equity release loans have wrecked havoc for borrowers in many countries. Like FX loans (see Icelog here), they have been a wandering financial curse. When circumstances change, bankers claim they could not have known – a hollow claim given the history of these loans.

The Landsbanki equity release lending saga has now been running for over a decade, closely followed on Icelog for the last few years (an overview here; link to earlier coverage here). This is a saga in three chapters:

1 The Landsbanki Luxembourg lending – how the loans were sold (an interesting aspect, given that banks all over Europe have lost FX lending cases due to EU consumer directives); the (unrealistically high?) evaluation of the properties used as collaterals; was there ever a viable plan in place in the bank to properly invest that part of the loan that was suppose to pay for the payout part; how credible and trustworthy was the bank’s information to customers? Given that Landsbanki was in dire straits when it started selling these loans it is also of interest what the bank’s purpose was with the loans: just another financial product or a product to save the bank? – This chapter is part of the criminal case in Paris.

2 The administration of Landsbanki Luxembourg has raised many and serious questions that Luxembourg authorities have so far been utterly unwilling to consider. The administrator, Yvette Hamilius, accuses the borrowers of simply trying to avoid paying. In 2012, the Luxembourg prosecutor Robert Biever issued a statement in her favour, without ever having investigated the case; an interesting if scary example of how the justice operates in the Duchy that depends on banking for its good life. – However, as earlier recounted on Icelog, the borrowers have a very different story to tell, of misleading and conflicting information on their loans and then an unwillingness on behalf of the administrator to engage with them and answer their questions. – Interestingly, Landsbanki Luxembourg has recently been losing in civil cases in Spain where equity release borrowers have brought the estate to court, mainly on the ground of consumer protection (see ERVA for various moves in Spain).

3 The sole creditor to Landsbanki Luxembourg is LBI., the estate of the failed Landsbanki Iceland. LBI has no direct control over Landsbanki Luxembourg but as seen from its webpage, it follows the case closely. The assets in Luxembourg are now the only assets left for LBI to distribute to its creditors. The question is if the administrator’s hard line against the borrowers, with the accruing legal cost and the clock ticking in eternity, really is in the interest of Landsbanki Luxembourg’s sole creditor.

This time there is a formidable presence on the borrowers’ legal team. Originally Norwegian, Eva Joly studied law in France. She was appointed an investigative judge in the early 1990s, famous for taking on the great and the not so good in major corruption case, where dozens of people, who never expected to see the inside of a prison cell, ended up just there. Joly, an MEP since 2006, cooperates with her daughter, Caroline, also a lawyer.

It remains to be seen how things progress this time in the Paris court room at the grandiose Palais de Justice.

*Together with his son Thor Björgólfsson, Björgólfur Guðmundsson was the largest shareholder of Landsbanki; father and son owned just over 40% of the bank but in reality, controlled over 50% of the bank since ca. 10% of the bank’s shares were in several offshore companies, controlled by the bank itself. This is one the many things exposed by the 2010 report by the Icelandic Special Investigative Commission. Guðmundsson was declared bankrupt following the banking collapse, his son is still one of the wealthiest people on this planet.

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Written by Sigrún Davídsdóttir

May 21st, 2019 at 11:14 am

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The ELSTAT case in Greece exposes the weak rule of law

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Yes, the case against former head of ELSTAT Andreas Georgiou is still on-going in Greek courts. In spite of international concern for rule of law in Greece, Greek authorities continue the persecution of Georgiou, now in its 8th year. The latest turn beggars belief: the former vice president of ELSTAT, Nikos Logothetis was found to have hacked Georgiou’s emails for months in 2010 after which the Greek police confiscated two computers and a hard drive from Logothetis. Logothetis was charged with hacking but, on account of ‘technical reasons’ he was never tried! Now, following his recent request, Logothetis has been given back his previously confiscated assets, with Georgiou’s emails still in them. In the meantime, there is no mercy for the man who, together with his team at ELSTAT, oversaw the final corrections of Greek statistics and changed the working practice at ELSTAT in order to re-establish trust in Greek statistics.

As the Greek economy started to deteriorate in 2009, it was discovered that since before 2000, Greek national statistics concerning the economy had been falsified. During the winter of 2009 to 2010, work was done in order to find the correct data. Part of that process was hiring a new director of ELSTAT, the Greek national statistics office.

The new director was Andreas Georgiou, who had previously worked at the IMF in Washington. When Georgiou started in his new job at the beginning of August 2010, the relevant statistics had mostly been corrected. Georgiou and his team put the last corrections in place and introduced the necessary and recognised statistical methods, in order to safeguard the correct procedures and consequently the correct statistics.

Data does not falsify itself

Since data does not falsify itself, it would have been expected that Greek authorities would have opened an investigation into the falsification, which, as mentioned above, took place for over a decade.

But no, that was never done – no investigation, no stones turned.

Instead, only a year after Andreas Georgiou took over at ELSTAT, he and some from his team found themselves investigated and prosecuted, in several still on-going cases. Although parts have been thrown out repeatedly, the cases have been re-instated, again and again, in a process that shows clearly that Greek courts and Greek judicial authorities do not abide by the sort of justice principles considered the fundament of rule of law. Georgiou served his full term as director, from 2010 to 2015.

Kathimerini: the prosecutions of Georgiou equal witch hunt

Greek media, such as the newspaper Kathimerini, has earlier called the prosecutions against Georgiou a witch-hunt, and connected it to the dark forces around Kostas Karamanlis.

The latest turn in the ELSTAT saga – a worrying sign of the state of the Greek judicial system – is yet another unbelievable chain of events: Nikos Logothetis was found to have hacked and stolen emails from Georgiou from the time Georgiou became the director of ELSTAT and for the following months, until Logothetis was literally caught in the act when the Greek police paid him a visit at his home.

As a consequence of the hacking, Logothetis was dismissed as the vice president of ELSTAT and charged in 2011 with the hacking. However, although material from Georgiou was found on Logothetis’ computers, the charges were finally dropped in 2017 for “technical reasons.” Thus, Logothetis was charged but never tried for hacking Georgiou’s email.

The last turn in this story is this: Logothetis asked to have his two confiscated computers and a hard drive returned. His request was duly met: not only did he get his machinery back – it was not wiped clean but still contains Georgiou’s emails.

Slander case – yet another example of how dismissed cases pop up again

Further, On May 23, 2019 the Athens Appeals Court is slated to try Andreas Georgiou’s appeal of his October 2017 civil conviction for simple slander, for which he will have to pay monetary damages and make a ‘public apology’ by publishing parts of the decision to convict him in Kathimerini. In Greek law, “simple slander” means making statements that are not false but nevertheless damage the plaintiff’s reputation.

In this case, the plaintiff is Nickolas Stroblos, who was head of the National Accounts Division of the Greek statistics office from 2006 to 2010. In 2014, Stroblos objected to a 2014 press release by Georgiou where Georgiou defended the statistics produced during his time in office, noting they had always been validated by Eurostat contrary to earlier; yet, the period when fraudulent statistics, as deemed by Eurostat, were produced was not being investigated.

This fact, that Georgiou, who corrected the statistics is being investigated and not those who were responsible for the fraudulent statistics, has also been pointed out by the EU’s European Statistical Governance Board.

This is what Georgiou was stating in the 2014 press release where he was defending himself against baseless and slanderous public accusations, made inter alia by Stroblos. It should be noted in 2016, Georgiou was convicted of parallel criminal slander complaint, made by Stroblos, in criminal court but that conviction was annulled by the Greek Supreme Court on account of legal errors and irregularities in the convicting decision.

International concern, yet no change of heart in Greece

Both Eurostat and international associations of statisticians have voiced their concern. As Georgiou said when he addressed the Financial Assistance Working Group of the Economic and Monetary Affairs Committee at the European Parliament a year ago, the fact that these prosecutions have continued for seven years in Greece seriously undermines Greek and ultimately European statistics. This has long ceased to be only a Greek affair – it is a serious threat to European institutions.

In his talk Georgiou pointed out that the incentives created in Greece “are poisonous. Would the responsibility for allowing such incentives to arise burden only the Greek State or also EU institutions and other EU stakeholders that are willing to live for years with this situation, which gives rise to these incentives?”

Further, Georgiou underlined that Greece will not leave its troubles behind and prosper until “there is a firm commitment to credible official statistics. And this commitment will not be there—irrespective of anything that may be declared or signed—as long as the relentless prosecution of statisticians who followed European statistical law and statistical principles continues.”

Icelog has over the years on various occasions covered the ELSTAT case. See here a link to previous blogs on the case.

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Written by Sigrún Davídsdóttir

May 16th, 2019 at 11:49 pm

Posted in Uncategorised