Tribunal turns down Nemea request for stay on proceedings

Nemea Bank has been refused a request to stay proceedings in a complaint they filed in the Financial Services Tribunal, against the Malta Financial Services Authority.

The online-only bank went under administration in 2016 when the European Central Bank instructed the MFSA to place the bank’s assets under controllership. At the time, the bank’s directors also included former prime ministers Lawrence Gonzi and financier Joseph F.X. Zahra.

Its owners, Heikki Niemela and Mika Lehto, have now been refused a request for stay on the FST proceedings until such time as their bank directors are granted access to the bank files, IT systems and financial resources so that the bank can pay for representation by its legal counsel.

Nemea’s owner insisted that since an Appeals Court decision in November 2018 had recognised them as having juridical interest to file a complaint in the FST, they should be reinstated in their positions at the bank so as to carry out their responsibilities.

The request was opposed by the MFSA.

Neimela and Lehto have also instituted proceedings before the General Court of the EU, challenging the ECB’s decision and contesting the revocation of its licence as a European credit institution. In a preliminary decision, the General Court stayed proceedings until a decision is taken in a similar case being head by the European Court of Justice. Nemea is demanding €10 million in damages in its appeal before ECJ.

The FST said the present appeal and those before the General Court of the EU were different and the proceedings at the General Court outside the scope of the tribunal’s competence.

Nemea had €68 million in assets, composed mainly of €30 million in loans and advances to customers and €22 million in loans and advances to banks when it was taken under control. According to the unaudited financial position in March 2016, the bank owed €61 million to customers.

Paradise Papers

A €10 million deposit from an Azerbaijani-owned company in the now shuttered bank Nemea, was one of the reasons why the European Central Bank ordered the suspension of the bank’s Malta licence.

A Nemea Bank employee reported suspicious activities at the bank to the ECB, and that the ECB had taken interest in an Azerbaijani company’s deposit.

The Paradise Papers reveal that a single €10 million deposit was placed into a Nemea account by an Azerbaijani woman, when most of Nemea’s deposits were just a few thousands euros. The deposit was carried out by a Maltese company owned by a Luxembourg company, whose ultimate ownership rests with an Azerbaijani woman residing in Paris.

The firm that processed the transaction is Malta company Nila International Services of Naxxar, which is owned by Luxembourg company Vortex International.

The Paradise Papers revealed a receipt of a €3 million transfer to Nemea from the account of Finnish billionaire Antti Herlin’s asset management company Security Trading Ltd, used for Nemea’s recapitalisation.

But this transaction came over a suspicious land transfer that is now the subject of a police investigation.

Helsinki land sale

Nemea attempted to quickly acquire €3 million in capital by selling off land in Finland to Antti Herlin, owner of the Finnish lift and escalator company Kone.

The land was owned by the company Langvik South, which is partly owned by Nemea. But other shareholders reported Lehto to the police for unilaterally carrying out the sale without their consent.

Nemea’s subsidiary Revestor owned 50% of the company Langvik South, the proprietor of nine properties and 78 hectares outside Finnish capital Helsinki. In May 2016, Langvik was sold to Herlin for €8.5 million.

But one of the four shareholders of Langvik – Mikko Pyykko – claimed that Nemea’s owner Mika Lehto had unilaterally signed the sale with a proxy on behalf of the other owners. Pykko said he had no knowledge of the sale.

In the autumn of 2017, shareholders of Langvik South filed a police report into the illegal sale.

Lehto has said the previous owners knew about the deal beforehand. “The claim is entirely false and not true. The transaction was arranged with the largest of the minority shareholders’ full knowledge of the deal.”