Political Fallout Begins: Former Cyprus President Named In Loan Write-Offs Leading To Banking Insolvency

A few days ago, when news hit that Cyprus has begun investigating who the people were who had managed to pull cash out of nation’s insolvent banks, both during the capital control “blackout” period and previously, we asked “how much longer will the rule of law remain in Cyprus once full blown class warfare is unleashed, and the 99% are generously handed the list of the 1% who were “informed” enough to pull their money from the flaming sovereign equivalent of Bernie Madoff, while every other uninsured depositor is facing losses of up to 80%, and soon 100%?” We may get the answer much sooner than expected, as the first iteration of this list: one naming the beneficiaries of millions of loans written off by the now insolvent Cyprus banks and therefore indirectly responsible for the “impairment” of the banks’ depositors, was released yesterday by Greece’s daily Ethnos newspaper. But what virtually assures substantial political fallout is that among the people listed is Cyprus’ former president, George Vassiliou.

Kathimerini summarized the situation as follows:

A list of Cypriot companies and politicians that allegedly had millions of euros in loans written off by the three Cypriot lenders at a center of an unprecedented banking crisis on the Mediterranean island has been forward to Cyprus’s parliamentary ethics committee after its publication in Greece’s daily Ethnos newspaper.


According to the revelations, Bank of Cyprus, Cyprus Popular Bank (Laiki) and Hellenic Bank — which were earlier this week acquired by Greece’s Piraeus Bank — has forgiven companies, MPs and local authority officials millions of euros in loans over the past five years. The list reportedly features the names of politicians from all Cypriot parties except Social Democracy (EDEK) and the Social Ecology Movement (KKO).

Readers may or may not be shocked to learn that corruption and cronyism, in broad terms, was alive and well in Cyprus in the months and years leading to the failure of the local banking system with its publicly elected politicians at the very forefront:

According to Ethnos, Bank of Cyprus wrote off the 2.8-million-euro loan of a hotel with ties to the communist-rooted Progressive Party (AKEL) and forgave significant portions of many other loans. For instance a national labor union is said to have been forgiven 193,000 euros of a 554,000-euro loan. An unnamed company was forgiven 110,000 euros from a 1.83-million-euro loan, a prominent deputy of the centrist Democratic Rally (DISY) party saw 101,000 euros of a 168,000-euro loan written off and a company owned by the brother of a former minister of the conservative Democratic Party (DIKO) had 1.28 million euros of a 1.59-million-euro loan written off.

The list refers to several other MPs and the mayor of large city who allegedly had significant portions of their loans forgiven by Bank of Cyprus. Companies linked to a member of the bank’s board, to the daughter-in-law of a DIKO deputy and several others also appear to have been offered significant loan relief by the Bank of Cyprus.


As for Laiki Bank, it is said to have written off several loans taken out by MPs of AKEL and DISY. The bank also appears to have written off 5.8 million US dollars in debt from a company whose majority shareholder is said to be a well-known Cypriot politician. The ex wife of a senior ministry official and a company owned by a local ambassador also appear to have been facilitated.

Today, as the fallout avalanche from the release of the list begins to accelerate, we get even more information courtesy of Cyprus-Mail, which names none other than a company majority-owned by the former president, as being a direct beneficiary of the broke banks’ depositor-funded generosity:

The government yesterday reaffirmed its intention to fully investigate the banking sector, as a list surfaced with names of current and former state officials who allegedly had their loans written off by banks.


The list, published in Greece, contains the names of former and current MPs as well as other prominent individuals, including former president George Vassiliou. According to the report, Vassiliou held a 51 per cent stake in a company that agreed to have $5.8 million written off.

And now that Cyprus is broke and facing a depression it is probably a good time to do some serious Monday Morning quater-bailouting:

The government said the matter would be investigated as part of a wider probe into what caused the collapse of the island’s economy and banking system.


Three former Supreme Court judges were appointed on Thursday to look into the debacle.


Their mandate includes the investigation of the “the events and decisions relating to the provision or write off or reduction of loans or the removal of guarantees or banks affording other concessions, in Cyprus and abroad.”


The government said it would handle the matter with full transparency and would not hesitate to hold anyone accountable as long as any improprieties were substantiated.

Sure enough, in order to avoid being held “accountable” the explanations have begun. Enter the former president:

Former president Vassillou said his stake in the company, which was operated by his former son-in-law, was acquired after he provided guarantees against its large obligations.


The company, ERE (Middle East) Ltd owed Laiki $23,988,542 and €1,081,672, including interest, the former president said in a written statement.


The amounts had been also guaranteed by four other people who eventually refused to honour their obligations and were taken to court.


Vassiliou said that despite his share being much smaller, he agreed to pay Laiki $21 million and settle the debt.


Based on the agreement, Vassiliou paid $15 million while the balance was going to be settled in two instalments of €3 million in 2012 and 2014.


In return, Laiki was to relieve me of the old interest, something that is a usual and long-standing practice,” Vassiliou said.


Because the 2012 instalment was linked to the return of a guarantee as soon as a – still pending — project was completed in Qatar, it had been agreed for the payment to be pushed back until then, Vassiliou said.


The former president said he would wait for the findings of the attorney-general.

Other politicians have decided that the best defense is a strong offense:

DISY MP Prodromos Prodromou, whose name was also on the list, said he was suing the media outlets responsible, and the Central Bank of Cyprus.


Prodromou denied ever having a loan written off, saying the case in question concerned a forgery on his bank account.


“The person responsible for the forgery was brought before court and convicted,” Prodromou said. “The bank recognised part of the responsibility for the charges through forgery and agreed to share the loss.”


AKEL-linked trade union PEO was also included in the list over a €3.0 million loan.

Needless to say, everyone else on the list is also coming up with a bevy of excuses:

Former DISY MP Sofoklis Hadjiyiannis said his case concerned interest and other charges that were added on illegally after he settled his debt to the bank.


AKEL MP Nicos Katsourides was also caught up in the affair after he was linked with a company that allegedly had a debt written off. Katsourides said neither he nor any family member had any relation with the company’s share structure although his son had been employed by the outfit at some point in the past.


Katsourides said he had contacted the attorney-general and asked him to hand the list over to the investigating commission looking into the economic debacle.


DISY MP Soteris Sampson also denied the allegations, saying he would make public his bank transactions as soon as they were provided by the bank.


Former agriculture minister Timis Efthymiou said his obligations to the Bank of Cyprus stemming from him being a shareholder in a company “have been met by paying off a loan within the framework of a legal settlement with the bank in 2008.”

And so on. What the common theme here is that the very same Members of Parliament who were so vocal in rejecting the insured depositors’ impairment just to save their skins from a public mutiny (but so quick to sacrifice the wealthier citizens and small and medium corporations to a haircut that may be as deposit large as 100%), did everything in their power to avoid a vote on the final bank “resolution” which effectively handed over the country’s sovereignty into the hands of the Troika and its liquidators, but not before they themselves were among the key beneficiaries of the impairments on the banking system’s asset side.

It is these bad assets and impaired losses, as well as investing money in Greek bonds, and other worthless “assets”, that ultimately ended up forcing the restructuring of the bank and the cram up of the liability side up to and including the unsecured loans known as deposits.

Perhaps if the Cypriot public wants to find a scapegoat to its troubles, it should focus its anger not only at the Russian Oligarchs and the Troika, but to those who were most complicit in betraying the public’s trust: the same politicians who were elected to protect their citizens and the country’s constitution (flagrantly abused as per yesterday’s revelations), including the very president of the nation. That is, of course, if the local apathetic population has not been zombified too much to even care about why billions in wealth was just confiscated from it. Because if that is indeed the case, they, and everyone else who just sits idly by and does nothing as the global banking syndicate appropriates ever more middle-class wealth, deserves everything coming their way.

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