Negotiations break down for BOV settlement on Falcon Funds fiasco

Swedes berate bank’s ‘nasty negotiation game’ as delaying tactic on possible multi-million lawsuit

Talks between Bank of Valletta and the Swedish pensions authority over an alleged settlement on the Falcon Funds fiasco have ended abruptly, as legal steps could ensue.

The bank was the custodian of a Maltese private pension promoted to Swedish savers, which was said to have lost around €80 million in savers’ cash due to bad investments when the fund was taken off the Swedish pension platform.

Since then, the Swedish pensions authority has given notice to BOV that it will hold it responsible for damages, having been the custodian of the fund.

Bitter swede: the Falcon Funds case is regarded as Sweden’s largest economic crime ever
Bitter swede: the Falcon Funds case is regarded as Sweden’s largest economic crime ever

One of the officials at the Swedish pensions authority told business newspaper Dagens Industri that talks with BOV had led nowhere and that the authority had reached the end of the road on negotiations.

“They said the accusations are purely ridiculous,” Henrik Borg said, who said an offer was mooted that was not far off from the Swedish authority’s position. “The negotiations were at a very high level, and they gave the impression of being very serious. It turned out to be just a delaying tactic, that is, a really nasty negotiating game.”

The pensions authority is ready to sue BOV and had already filed a judicial protest against the bank and several other people implicated in the Falcon Funds fiasco.

But the authority’s head of legal, Anna Akesson, said in comments to the Dagens Industri that litigation would be costly at 2% of the disputed €73 million being claimed. “Our lawyer in Malta believes the process could take up to 20 years,” Akesson said.

BOV’s executive for marketing, Charles Azzopardi, told MaltaToday any negotiations between potential litigants were highly confidential “and certainly not a matter for public disclosure”. He said the bank had nothing further to add to what it has already published in its annual report.

The bank said the amount of the claim does not necessarily reflect its potential financial exposure if a ruling were to be made against it on this matter. In 2018 a litigation provision of €75 million was recognised in the statements of profit or loss.

BOV was served with judicial letters in April, with the pensions authority holding the bank responsible for any losses and damages it may have suffered with its investment in Falcon Funds. “The sub-funds sustained losses, and there could be further substantial losses, that are the result of various investments which failed, and this due to omissions [on BOV’s part]… negligence and non-observance of the applicable rules. The Custodian failed to honour its obligations to supervise the fund and ensure the investment manager conformed to the investment objectives, policies and restrictions.”

Bank of Valletta has filed a judicial letter in Malta’s Civil Court, in which it gave notice that it intends holding 158 individuals and companies responsible for any losses the bank might incur on millions feared lost in the Falcon Funds pensions bust.

The individuals include former Nationalist MP and finance minister Tonio Fenech, who together with Joseph Xuereb and Ian Zammit, was a director of Falcon Funds Sicav.

However, investment decisions pertaining to the investment of some €247 million in Swedish pension savings inside Falcon, were taken by Temple Asset Management, an investment office whose director John Anthony Farrell was recently in custody in Sweden, to face fraud charges.

In Sweden, the case has been dubbed as the country’s “largest economic criminal case ever”, for the scale of millions lost in pensioners’ savings.

The case will try Max Serwin, also known as Emil Ingmanson – a one-time Sliema resident who led the creation of Falcon Funds – who is suspected of having influenced the pension fund’s investment managers, Temple Asset Management of Floriana, to inject cash into suspect financial instruments.

In Malta, an audit by KPMG revealed how TAM invested millions into illiquid financial instruments, in breach of the Falcon Funds rules, to benefit people close to Serwin.

Many millions are still missing from the entire Falcon Funds pool. Falcon Funds has also sued TAM in Malta, as well as Max Serwin.