Tonio Fenech laments ‘unrealistic’ time frame for repayment of pension funds

Former finance minister Tonio Fenech tells Swedish minister that all investments in Malta-based Falcon Funds are 'intact', but warns that two-week time frame for the repayment of funds is 'unrealistic' 

Former PN finance minister Tonio Fenech
Former PN finance minister Tonio Fenech

Former finance minister Tonio Fenech has accused the Swedish Pensions Agency of attempting to prejudice the position of the Malta-based fund which is reportedly unable to pay back €247 million in savings because of ‘major investment fraud’ in the eyes of Swedish courts and public opinion.

In a letter sent to the Swedish minister for financial markets and consumer affairs, Fenech reassured that all investments in the Malta-based pension fund which is under investigation for fraud are “intact” but warned that “unrealistic” time frames for the redemption of funds work against the interest of pension savers.

Last week, MaltaToday reported that Fenech is facing a criminal investigation in Sweden after the country’s pensions authority reported to the Swedish police a Malta-based fund he is a director of – allegedly for its inability to pay back Swedish savers their monies.

The fund denies wrongdoing and says it will return the money as soon as assets can be sold.

In the email sent to Per Bolund, who also serves as Swedish deputy finance minister, Fenech however insists that “the investments and monies pertaining to three sub funds in the Swedish Pension System are intact, in the custody of Bank of Valletta, a reputable bank in Malta and are being remitted to the Swedish Pensions Agency as the assets are being sold and settlements are made.”

In Sweden, savers may opt to invest a portion of their state pension in private funds that have entered an agreement with the Swedish Pension Agency.

The Swedish pensions authority (SPA) – reported the alleged fraud to the country’s economic crimes police as Falcon Funds, the pension fund licensed by the Malta Financial Services Authority, stands accused by the SPA of being unable, or unwilling, to pay back a total of €247 million (2.4 billion Swedish kroner) in savings to 22,000 investors.

Falcon Funds has so far returned 1.25 billion Swedish kroner, but pension agency spokesman Jimmy Larsson-Hagberg said the rest may be lost.

Following an investigation, the Swedish pension agency said Falcon Funds had employed a company using questionable methods to get savers to sign over money, and accused the firm of investing in financial instruments designed to obstruct visibility.

However, Fenech and the board of Falcon Funds dispute the agency's right to cancel the agreement, insisting that Swedish prosecutors found nothing illegal in the way pension money has been transferred to the firm.

In the email, Fenech reiterated that once it accepted the SPA’s redemption request, investments have started to be transferred back to the Swedish Pension System but he lamented that the tight time frames are constraining Falcon Funds.

“There are obvious logistical practicalities that make it impossible to wind up a SEK 2.4 billion in two weeks as the Swedish Pension Agency expected,” Fenech said, adding that the legal obligations of the Falcon Funds board of directors is to ensure that the transfer of funds is done in an orderly manner “to ensure that when assets are sold this is done in the best interest of investors i.e. not to create unnecessary losses.”
In his email sent on 14 October, Fenech also insisted that allegations of unlawful use of client IDs were found to be baseless by the Swedish prosecutor, and accused the SPA of using media pressure against it.

“We have no objection to authorities enquiring on the workings and actions of the Fund, and as Directors we will co-operate fully, however the public pronouncement done by the Swedish Pensions Agency sought only to prejudice the position of the Fund in the eyes of the court and public opinion,” Fenech wrote.

“The Fund went to the Administrative Court to seek remedy, which the court however referred to the Civil Court, and that is where we are today,” he added.

While noting that the MFSA does not share the SPA’s view that the pension fund invested money in ineligible investments, Fenech said the SPA was making wrongful claims “on matters that are supervised by competent financial authorities in Sweden and Malta and not by them. These assertions damage not only the reputation of the Fund but also the interests of investors when it comes to dispose of the investments as market offers take advantage of the situation.”

The SPA has said that while the MFSA has directed Falcon Funds to start paying back the cash, “millions are still missing. This raises a strong suspicion that the events that have transpired are part of a major investment fraud”. This suspicion has been corroborated by anonymous reports and documents turned over to the authority in the last weeks.

Swedish minister ‘concerned’

In a brief comment to MaltaToday, Bolund said he is “very concerned” with the Falcon Funds saga, adding that “this shows that we need a better consumer protection for Swedish pension savers. It is also important to stress that all financial service authorities in all EU member states are expected to follow the EU harmonized regulation and also perform the necessary supervision.”

The Swedish government is mulling the introduction of new legislation and could ask agencies supervising the pension system to tighten the rules.
Bolund added that while it is following the ongoing legal procedures involving Falcon Funds, “the Swedish pensions agency is working towards regaining all the money for the pension savers that have been affected.”