Pilatus shareholders demand control of bank

The shareholders of the private bank Pilatus have demanded that the Maltese financial regulator allows them back on the board of directors in a bid to wind-up the bank, fearing further losses of assets under its present controllership.

Pilatus Holding Ltd said it wants to exercise its voting power to dissolve the bank, in a request it made to the Financial Services Tribunal to oppose the appointment of a controller to take over the bank’s running.

The bank was ordered to cease trading by the MFSA after the arrest in the United States of chairman and owner Ali Sadr Hasheminejad on charges of breaching US sanctions against Iran, which predate the opening of the bank in Malta in 2013.

The bank was at the heart of accusations by the late journalist Daphne Caruana Galizia that it had processed a $1 million transaction from the Azerbaijani ruling dynasty to Joseph Muscat’s spouse: an allegation that turned out to be untrue.

Since the publication of the Egrant inquiry conclusions, the bank has been on the offensive against its detractors.

In the last tribunal sitting, the MFSA objected to a question from Pilatus Holding to bank controller Lawrence Connell, demanding to know which issues were raised by the MFSA in relation to the concerns that led to his appointment, apart from those in the public domain.

The MFSA’s counsel opposed the question, saying the information requested constituted an internal and confidential communication. “It is clear that the divulging of the information requested could hamper the investigation.Therefore such information cannot be divulged and the witness cannot be released from any professional secrecy,” the MFSA said.

Pilatus Holding is complaining that putting banking veteran Lawrence Connell as controller was costing the bank “a potential USD600,000 (€523,000) per annum” in remuneration fees alone, apart from the remuneration of additional staff and advisors engaged by Connell.

“Whilst the MFSA is supporting its decision on the basis of public interest, the financial burden placed on the bank is unjustified since the competent person cannot run a business which has been effectively subject to a cessation order by the MFSA itself, and disproportionate since it creates a real risk that the bank’s capital reserves will be eroded or consumed altogether by the remuneration.”

The shareholders are claiming that the bank is incurring expenses of $100,000 (€87,000) a month while it remains under the control of the competent person, and is demanding that its own representatives be allowed to minimise any costs and preserve the bank’s assets.

The hearings now continue in October.

The bank closed down its London branch in April, but Pilatus also requested that the bank’s premises at Whitehall Mansions have its lease terminated.

The bank has already stated that the MFSA’s decision to shut the bank down after the arrest of Ali Sadr Hasheminejad is unfair over what, they insist, are “merely allegations… Such allegations have caused the MFSA serious concern and raised reasonable doubts about the integrity, propriety and suitability of Mr Sadr as a director and ultimate beneficial owner of the bank.”

Hasheminejad was arrested in February and was charged in a New York district court of having evaded US sanctions against Iran, to commit money laundering and bank fraud by funnelling over $115 million in payments for a Venezuelan housing complex through the US financial system for the benefit of his Iranian family’s companies.

The MFSA had said that in view of the criminal actions, this raised reasonable doubt about the integrity and suitability of Hasheminejad to fulfil his duties and proceeded to appoint a competent person to take over the bank’s operations.

Pilatus has already indicated it will hold the MFSA responsible for any damages it suffers. In a letter to MFSA director Marianne Scicluna, Pilatus chairman Helmut Bauer accused the regulator of discarding the fundamental right of the presumption of innocence. “That the MFSA not only discards the presumption of innocence, but actually acts in such a dismal manner on its serious concern by appointing a competent person… is manifestly unfair… after from being excessively intrusive and completely disproportionate.”

In another letter to Lawrence Connell, Bauer had informed the MFSA’s appointee that only three weeks after the MFSA measures had been taken against the bank “the value destruction is well advanced. The damage done so far is significant. We remain convinced that this value destruction would have been avoided if the MFSA had responded to the arrest of Mr Sadr for allegations entirely unrelated to the bank in a more responsible and proportionate manner.”

Bauer also described the London branch of Pilatus bank as having had a “very comfortable capitalisation”.

In May, the New York southern district court granted bail to Hasheminejad, after lawyers presented an impressive $34 million bail package that included some 40 bonds from family, friends and colleagues worth $14 million apart from the Iranian’s own wealth, property and investments, as well as restricted travel and electronic monitoring.

Since the publication of the Egrant inquiry’s conclusions, Pilatus Holding has also accused its former employee Maria Efimova – who was sacked after three months and later charged by Maltese police of misappropriating funds from the bank – of being a ‘Russian informant’ that fed misrepresentations to politically-motivated collaborators.

Efimova was first held up as Daphne Caruana Galizia’s primary source on the Egrant allegation, claiming the PM’s wife was the owner of a secret Panamanian company and that ownership documents had been kept inside Pilatus Bank.

But Efimova later denied being Caruana Galizia’s main source, and said she only confirmed allegations that the journalist was already working on.

The Egrant inquiry’s conclusions said Efimova gave contradictory accounts that have discredited her status as a lauded whistleblower after Magistrate Aaron Bugeja said the Egrant allegation was based on fabricated documents.

Pilatus Holding have accused the MFSA of kneeing the Egrant allegation to be a fabrication, saying it interviewed bank officials with “pointed and incriminating questions”.

The MFSA is currently carrying out an examination of every single transaction at Pilatus Bank.