‘BOV manager redeemed his cash but didn’t tell me' – client

A mechanic who invested well over €100,000 of his life savings in the La Valette multi-manager property fund, told MaltaToday his bank manager stopped taking his car for servicing when the fund went awry and omitted to tell him that he sold his own personal investment in the fund.

Mario Scerri, a complainant in the judicial protests against Bank of Valletta, Valletta Fund Management, Insight Management and La Valette Sicav, showed MaltaToday the contents of his complaint to the financial regulator, which next week is expected to issue the first of three investigations it conducted in the bank’s stewardship of the fund, which lost some €50 million in value.

Scerri publicly identified himself as the complainant mentioned last Wednesday by Paul Bonello, the stockbroker who filed the judicial protests, during a meeting with some 500 investors in the fund at the Catholic Institute.

Scerri, a mechanic in Rabat, said the bank manager who had recommended that he invest his wealth in the property fund, would often call him up so that he could hand him his car keys and service his car or fix it.

“He had assured me the investment in the property fund was managed by Insight, a globally known investment firm. He told me the fund was ‘better than government bonds’ and that even he and his children had invested €35,000 in the fund,” Scerri told this newspaper.

In April 2008, at a time when the level of the fund was still higher than the original, a bank clerk called Scerri recommending him to sell off the investment, and that she had been instructed to inform all other fund holders.

Scerri gave her his verbal agreement, but she later informed him she could not execute his command because he was a client of BOV’s Wealth Management. Scerri was asked in to meet another manager in Rabat, this time telling him that the clerk who had called him “knew nothing about the investment and that I shouldn’t pay her any attention.”

“I insisted upon selling my investment but the manager refused. Months later, in August 2008 the property fund was suspended by VFM. I realised that the manager who had sold me the product was evading me and he didn’t even bring his car to me any longer.

“In fact, it was only towards the end of August 2010 that I spoke to him again on the phone, to see if he was worried about the performance of the fund. And it slipped his mind because he told me he had sold his investment just before the fund was suspended. And I told him, ‘some man you are’.”

Scerri told MaltaToday he made his complaint on 21 December, 2010 to the Malta Financial Services Authority, but so far he has never been called in to verbally offer the information or present a sworn affidavit.

His case was brought up last Wednesday at a meeting organised by Paul Bonello of Finco Treasury Management, in which he exhorted clients and other property fund investors not to accept a 75c share offer compensation by Bank of Valletta. The bank says the offer is conditional on investors dropping all legal claims they might have against the bank once the regulator issues its investigation report. Bonello claims they shareholders must be paid their original investment with legal interest.

The MFSA is conducting three investigations, of which one – dealing with the bank’s breach of investment restrictions – is already completed and will be published next week. Bonello has called on the MFSA to make the report available to each and every investor in the fund, or he would initiate legal proceedings against the MFSA for neglecting its duty to protect investors as laid down in the law.

The other two investigations concern the misselling of the property fund to retail clients who signed off a declaration saying they were ‘experienced investors’; and the alleged access to price-sensitive information of a Sicav director, bank employees and favoured clients who sold off their investment in the fund before it was suspended in 2008 when it went belly-up.

Labour MP Evarist Bartolo made reference to the allegations concerning an abnormal level of redemptions – 14.7 million shares, valued at some €13.4 million or 16% of the fund – by investors possibly aware of the worsening state of the property fund after the Belgravia bust: maybe even directors and staff of Bank of Valletta and investment arms VFM and VFS, and perhaps even family relatives. The MFSA is investigating the matter, but Bonello has previously remarked that the regulator was not forthcoming into how seriously it was taking this allegation and the actual evidence it was provided with to investigate.

Bank of Valletta has denied that the withdrawals from its property fund were abnormal, in a comparison with the withdrawals from other funds, including HSBC funds that it showed to journalists last year. But Bonello said that redemptions in the BOV property fund in just ten months were eight times the levels of withdrawals that took place over two years in the HSBC property fund.

The judicial protests filed against BOV hold the bank responsible for investing 41% of the fund’s investments in the Belgravia Group, which reinvested the money in real estate that had too much debt propping it up to survive a downturn in property prices.

It is believed that when BOV saw the 2006 accounts filed by Belgravia in February 2008, it attempted to withdraw its large investment from one Belgravia fund on 17 March, 2008 – a month before Mario Scerri was informed by telephone to sell off his property fund investment, then still worth 12% over his original investment.

Dealings in BOV’s property fund were only put on ice in August 2008, when by that time the Belgravia group was being investigated by the Jersey police and the Jersey financial regulator, on suspicion of fraud.

Scerri also told MaltaToday that he had always insisted with BOV that he did not want a risky investment and wanted to keep his capital investment safe. Bonello has previously accused the bank of having sold the La Valette property fund as a safe, low-risk investment. In fact, the property fund’s marketing booklet described the fund as “not as volatile as bond and equity classes”, proving investors with “peace of mind” and that all monies were invested in “best of breed funds with a proven track record.”

Scerri said that he was also sold Lehman Bros perpetuals but that nobody at Bank of Valletta had explained to him the risks of so called ‘hybrid bonds’ – which have a high credit risk since they are subordinated bonds, meaning that in case of bankruptcy, other creditors take precedence before the payout of any interest. The Lehman case was in fact mentioned to MaltaToday by several other investors who said they were unaware that these were subordinated bonds, putting them at the far end of the creditors’ list.