Bank of Valletta says offer was 'its own initiative'

Bank of Valletta has defended its compensation offer to shareholders and investors in the La Vallette Sicav's property fund, saying their offer is on no ‘take it or leave it’ basis, as claimed by their main accuser, Paul Bonello of Finco Treasury Management.

“It has been carefully constructed so as to be fair or equitable, as has been explained in the letter sent to all investors. The offer has been freely made, and can be freely accepted or rejected by the investors according to their decision,” a BOV spokesperson told MaltaToday.

Reacting to claims that their offer, of 75c per share, may have had the 'blessing' of the regulator, the bank said the offer was entirely its initiative when asked whether any communication took place between BOV and the MFSA on the offer.

Bonello yesterday hit out at the financial regulator, saying its lack of personality was leaving investors in the dark as to whether they should accept the 75c share offer from BOV for their botched investment in the La Vallette Sicav’s property fund.

Bonello – who presented judicial protests against the bank in the name of some 400 investors – said all shareholders who accept the 75c share offer would have to give up any right to take legal action against the bank on any of the allegations that might be confirmed by the MFSA in two investigations into insider trading and mis-selling of investment products.

“How could the regulatory authorities permit such a morally dishonest and unjust move to be committed by the economically strong institution against the general public?” Bonello asked.

But the bank said it was not imposing its will on investors to accept the offer that is being made. “In BOV's view, as has been carefully explained to investors, or what is believed to be a fair and equitable basis.  BOV fully respects the right of each and every investor not to take up the offer if they are so minded.”

Bonello described the financial regulator as a ‘state of the art’ authority in theory, but that it lacked any personality to stand up to the banks in practice.

The MFSA has conducted three investigations, one of which concerns the breach of investment restrictions by BOV’s investment arm Valletta Fund Management. This investigation has already been presented to BOV, but not yet publicised.

Bonello said the bank could negotiate to substitute the interest to the return achieved on the bell-weather European Property Price Index, which would give a return of 17% (2005-to date) – amounting to some €1.15-€1.35 per share.

BOV is making a conditional offer without prejudice and “without admission of liability of €0.75 per qualifying share in the La Valette Multi Manager Property Fund which BOV is stating will cost €45 million, including €14.5 million in compensation. Bonello is accusing the authors of the compensation, PricewaterhouseCoopers - the auditors of the La Vallette Sicav - of having a conflict of interest in the matter.

BOV said that PwC only accessed data and information that was publicly available. “They did nothing that required forming ‘an opinion’ or the exercising of judgement. Therefore, in BOV's view, no question of conflict of interest arises.”

The bank says the offer was a “non-confrontational and expeditious closure” to the judicial protests by investors who held the bank responsible for the way the property fund, once valued in excess of €84 million, was depleted to some €24 million in 2009.

Bonello said the 75c offer was better than nothing and positive as a first step, but he said the bank was now presenting the property fund investors – many of them ageing and not cognisant of the difference between a bond and a share – with a “take it or leave it offer.”

“Why should these investors accept this offer and drop any claim against the bank irrespective of what emerges from the MFSA reports? This offer has no approval from the MFSA, so what sort of investment protection is this?” Bonello asked.

BOV is saying it will withdraw the offer – which is valid for just 30 days – in the event of acceptances below 70% of the outstanding shares.

But the bank also holds a significant institutional shareholding from the bank, which is how it carried the Sicav’s proposed resolutions in the last AGM when all 1,000 shareholders present voted against the resolutions.

“In view of the involvement of the BOV Group in the property fund, will the bank be exercising its votes on the settlement? And will MFSA as champion of good corporate governance and transparency in the financial services sector, be taking a position on this matter?”

BOV told MaltaToday that all investors in the fund will be "free to vote as they think is appropriate."