La Valette investors queue for delayed justice from financial services arbiter

Hundreds of investors who lost their money in a property fund after being mis-sold by Bank of Valletta are looking to a new financial services arbiter to finally provide them with full compensation.

Finco managing director Paul Bonello, who represents some 2,300 people who had invested in the supposedly low-risk La Valette property fund, said that he is confident in the strength of his impending case.

“The facts are already established, but the bank’s remedy was wrong,” the stockbroker told MaltaToday, referring to BOV’s partial compensation granted on condition that they waive legal action against the bank.

“What sort of justice is that? Is it justice if I steal €120 from you but only give you €60 in return?”

BOV had eventually compensated in full those investors who refused the bank’s offer, but ignored the Malta Financial Services Authority’s order to bring compensation up for the other 2,300.

It declined to comment on what stance it would take in light of Bonello’s case, with a bank spokesperson simply telling MaltaToday that it will “abide by all its obligations in accordance to the law”.

A ruling by the arbiter in favour of the investors would allow the Labour Party to keep its pre-electoral promise of full compensation to them.

Back then, the PL had promised to use its power to elect BOV’s chairperson to ensure that “serious negotiations” take place between the bank and the investors. However, that plan hit a brick wall when its chairman of choice, John Cassar White, warned that granting further compensation would set the bank on a legal collision course with its shareholders. This prompted Paul Bonello to accuse him of changing his pre-electoral assessment of the matter “faster than a chameleon changes colours”.

Bonello, who endorsed Labour and addressed a party mass meeting prior to the election, advised the government in its drafting of the financial services arbiter law.

However, he vehemently denied that his role as representative of the investors posed a conflict of interest.
“By that token, no practising lawyer would be allowed to advise government on a piece of legislation,” he argued. “My advice was impartial, granted in my capacity as a professional, and based closely on UK legislation and an EU directive on alternative dispute resolution that has been transposed into Maltese law.

“I strongly refute any suggestion that the legislation could be biased as a result of my input.”

He hailed the law itself as one that is “in full conformity with the principles of international justice.

“It’s a way of telling elderly investors who believe that they have been mis-sold that they can be compensated in their lifetime, rather than having to file a court case that can drag on for years.”

Indeed, the new law obliges the arbiter to make a decision within 90 days upon receiving a complaint. Exceptions are allowed for complex complaints, in which he can take up to a year to deliver a ruling.

Bonello gave no set date as to when he will present the case to the arbiter, but in a public letter he has advised La Valette investors to file their complaints with Finco by the end of June.

“This is a complex case, so it could well exceed the 90 day limit,” he said.

‘No reason to doubt Reno Borg’s independence’

The financial services arbiter is Reno Borg, a qualified arbitrator who had unsuccessfully contested the 1996 general election under the Labour Party ticket and was appointed BOV chairman following his party’s election to government. Upon the change in government in 1998, he was nominated by Labour to serve on the Broadcasting Authority – a position he retained until his appointment as arbiter.

Opposition MP Kristy Debono described his appointment as one “dictated by political patronage”, but Borg has denied that his political history risks undermining his independence.  “An arbiter worth his salt will act independently and won’t succumb to government pressure,” Bonello said, when asked whether he thinks Borg may be conditioned to rule in a manner that will allow Labour to keep its pre-electoral promise. “I have never spoken to Reno Borg, but I have no reason to doubt his independence.”