How BOV duped shareholders on Deiulemar affair for years

A few days ago, the present chairman of BOV, Gordon Cordina, informed the country that the Deiulem affair could have posed existential problems for the bank, and therefore the Bank had decided to pay €182 million in compensation to close the whole issue.

We found out what had never been revealed, that is that an internal investigation in 2015 by BOV into the trust services connected to the Deiulemar shipping company found no wrongdoings by the bank’s employees.

So, may I ask my first question: why was this internal report not made available to shareholders?

My second question: if there was no wrongdoing on the part of the employees, who in BOV had done the due diligence exercise in 2009? Who had recommended taking over the trust in 2009, when a Rome criminal court in 2004 had already ruled that the Deiulemar company had under-declared liabilities of €700 million? Why all the secrecy?

All this we get to know now. Before that, BOV had been duping one and all that the Bank had “a strong legal position” on the whole issue. And this they did for nearly seven years.

The timeline: 5 May 2015 – BOV appoints an Italian legal firm to represent it in court in Italy. Its lawyers told the bank in April that it has a “strong legal position” and no provision was necessary at this stage.

In its 2017 annual report, BOV declares it has “a strong legal position on these claims and, accordingly, no provisions are required. Deiulemar Trust – In November 2014, court action was instituted against the Bank by the curator of a failed group while under the trust of the Bank, by virtue of which a claim of €363 million was made. While the case has not as yet started to be heard, over the last three years there were various actions by the curator, the latest being a request for a precautionary warrant of seizure, in respect of which the Italian court has reserved its decision. The amount of the claim does not necessarily reflect Bank of Valletta’s potential financial exposure if a ruling were to be made against it on this matter.’

10 June 2018 – The bank issues a statement in which it reiterates that it is determined to take all the action required in any forum to defend itself against the unfounded allegations being levelled against it in the Italian Court of Torre Annunziata, as and when necessary.

20 July 2018 – In another bank statement, BOV rejects the assertion that the Deiulemar assets placed in trust was €363 million, and that it should return those assets or that value. The bank called the assertion “unfounded on the grounds that the assets placed in trust were practically worthless.”

23 July 2018 – Bank of Valletta announced that it is taking all the necessary measures and precautions to defend its interests as a defendant in the Deiulemar court case and will continue with business as usual. “This case will in no way impact the depositors, customers and employees of the bank,” BOV said in a statement.

2 February 2021 – Bank of Valletta is told by the European Court of Human Rights its case against Italy on Deiulemar case is inadmissible since the bank still has remedies it can pursue.

3 February 2021 – Bank of Valletta reiterated that the curators’ claim is entirely without any legal or factual basis, “as has been unequivocally confirmed by opinions provided by independent legal experts.” It said it will continue to pursue its defence vigorously, including its fair hearing concerns, before the Italian courts. If those prove unsuccessful, the bank said in a statement that it would petition the European Court of Human Rights again, once the Italian remedies have been fully exhausted.

But here is the cherry on the cake.

Just a few weeks ago, on 22 March, BOV told us all that the Deiulemar claim remains outstanding and continues to be significant. “Post year end, a judgement against the Bank was granted by the Tribunal of Torre Annunziata with regards to this case. This outcome does not change the Group’s expectations, based on the opinions of independent legal experts, that the case against the Bank will be found to carry no merit in the higher Court,” BOV said.

“It thus did not impact the financial results, and the Bank since appealed the judgement. Furthermore, the Bank still considers that it makes commercial sense to seek to resolve this claim at a level not exceeding the potential cost impact. For this reason, the Bank has retained the same settlement offer to the counterparty (the offer was not accepted), without prejudice and with no admission of liability. No further litigation provision was deemed necessary for the year ending 2021.”

So, a few weeks ago BOV declared to the four winds that “the Bank has retained the same settlement offer to the counterparty. This counterparty offer was €80 million.”

My question to Chairman Gordon Cordina is: What has happened in just 42 days for you to raise the offer from €80 million to €182 million? €102 million in 42 days... without even sounding out the shareholders. These millions would have come in really useful to the National Bank shareholders, from whom the bank was originally stolen nearly 50 years ago, as well as to the present BOV shareholders who have been deprived of any dividend for a number of years, also because of this whole mess.

These shareholders have had to bear the brunt of it all. What has been happening at BOV in the last years, and in these last 42 days?