Finco: reprimanded fund director is ‘body and soul’ BOV associate

Clarified at 12:36pm with reference to legal counsel.

Stockbroker Paul Bonello has called for the Malta Financial Services Authority to release its report into the investigation it conducted into the "massive" withdrawals from the La Valette multi-manager property fund, prior to its suspension of trading in September 2008.

Bank of Valletta yesterday announced the MFSA's investigation did not reveal any evidence to substantiate claims that BOV staff or persons connected to them, had access to confidential information when redeeming their shares from the La Valette property fund, months prior to its suspension in August 2008.

The bank washed its hands of John C. Ripard, the fund director who resigned on 6 January, following a reprimand from the MFSA for having sold his holding in the fund on the basis of insider information.

BOV chairman Roderick Chalmers declared that Ripard was never a bank director or a staff member.

But Paul Bonello said the bank's statement was hair-splitting. "Ripard is a BOV associate, body and soul, and a director of the Sicav..."

Ripard, once described by Roderick Chalmers as a man of "unimpeachable integrity", was now being legally assisted by a partner from the same firm as the bank's own legal counsel in the civil case filed by investors who did not accept BOV's compensation offer last year, Bonello said.

On Friday, BOV said the MFSA undertook a thorough examination of the level of redemptions that took place before the suspension of the La Valette fund. The MFSA investigation centres around whether directors, staff and favoured clients had access to insider information when they redeemed their investment prior to the fund's suspension.

But Paul Bonello of Finco Treasury Management, whose judicial protests against the bank in 2010 sparked a compensation battle by investors and retail clients after the La Valette fund lost €50 million in value, claims BOV's statement is selective of the MFSA report.

Bonello says the BOV statement confirms that banking staff had also redeemed their shares from the fund, but that it was easier for the MFSA to ascertain Ripard's responsibility in the case, who as a director was in official receipt of the fund's documents.

"No other member of the management, staff or connected persons are out of senses enough that they would document any inside information and put it in their files. Apparently MFSA wanted to sight 'evidence': perhaps some note of guilt admission, or contrition, or someone to to tell them 'yes I withdrew the money because they were telling me better take them now as the indicative investment value prices of suspended funds will be marked- down soon'."

Bonello said that should Finco's "strong suspicions [be] confirmed", the MFSA had to trace the money in case of unjust enrichment so that it can compensate other investors.

Bonello reiterated his strong belief that the MFSA had to analyse the "glaring" circumstantial evidence surrounding the €16 million in withdrawals, which he says were 16 times the value of redemptions made in two years from the competing HSBC property fund.

"One would think the psychological DNA of Maltese BOV investors is completely divergent and alien to the HSBC Maltese investors, as if they were living in different planets. Having found prima facie circumstantial evidence, it should then be for the Economic Crimes Unit and the Courts to assess the culpability or otherwise of these cases."

Bonello said Finco had also provided potential evidence where clients said they had knowledge of bank staff who had exhorted favoured clients and friends and relatives to sell.

"One of them made a declaration on his signature, mentioning names on 22 December 2010 and sent it to MFSA. This investor never heard from the MFSA. In May 2011, when I read his allegations during a public meeting without mentioning names, this brave man stood up and assumed paternity for that statement. Still the MFSA did not ask him in for discussions.

"In August 2011, he signed a sworn affidavit and sent it to the MFSA. Still they had not spoken to him up to 3 November, 2011 when they announced that they would be publishing imminently their report on the investigation of misuse of information.

"It was only because the next day client's legal advisor Prof Refalo wrote to the MFSA and brought this to the attention of the MFSA that in these last few weeks the MFSA have asked this whistleblower from Dingli to their office, at first telling him to attend unaided by his legal advisor, although they then made this 'concession' to have him accompanied by his legal advisor."

Painting the picture of how the redemptions must have been precipitated by worsening events, Bonello said that a very negative picture emerged when the 2006 accounts of the Belgravia European Property Fund, in which La Valette had invested a substantial amount of cash, were published in January 2008, revealing heavy trading losses.

"It ought to have dawned on any diligent director of the La Valette Fund now that the two other sister Belgravia companies where accounts had never been published since formation could not be in much better shape," Bonello said.

The September accounts of the La Valette Sicav were qualified by PricewaterhouseCoopers, because a number of its underlying funds had been suspended so their fair value was not possible to ascertain.

Bonello claims redemptions took place between January 2008 and 7 August 2008, at over-inflated asset prices ranging from €1.04 to €1.14 per share. "The real net asset price of the La Valette shares should have been recalculated immediately and accurately... as it happened those who managed to withdraw the funds, innocently or not, had a bumper profit instead of the much lower revalued price of €0.28 when it would start trading again."

In the months after suspension of the redemptions, corrections to the value of the fund marked down its value to €14 million.