Bank of Valletta loses €363 million security in Deiulemar case

An Italian court has ordered the forfeiture of a €363 million precautionary security from Bank of Valletta, in a successful claim made by the 13,000 bondholders of the defunct Deiulemar shipping company.

The Tribunal of Torre Annunziata delivered its decision against the bank today Tuesday, after the bank last year attempted an offer of €50 million for Deiulemar bondholds to settle the claim out of court, but was rejected.

In a company statement, Bank of Valletta said it will be immediately appealing the decision.

Under the Torre Annunziata proceedings, BOV was being requested to pay an amount equivalent to the value of the Deiulemar shares which had been settled on trust, with the bank as trustee. Bank of Valletta disputes the valuation of these shares, saying these were worthless following the bankruptcy of Deiulemar Group.

“Pending such appeal, the Bank would like to assure the market that it is well capitalized and its operations will not be adversely impacted by this decision,” BOV said in a statement.

In 2018, the bank placed in excess of €363 million in the hands of an independent entity, following an order from the Tribunal of Torre Annunziata as precautionary security. No new payment will be made as result of today’s decision.

Bank of Valletta is facing such a lofty claim for damages because, in 2009, it had taken over a trust that held €363 million in assets of the Deiulemar company, which filed for bankruptcy in 2012.

A Rome criminal court in 2004 had already determined that the Deiulemar company had under-declared liabilities of €700 million. In 2014, seven members of the three founding families of the Deiulemar company were jailed for up to 17 years for illegal financial transactions, owing €800 million to creditors.

The bank had conducted an investigation into the kind of due diligence carried out when it became a trustee for Trust Capital Trust, Trust Gaino, and Trust Gilda – which are being called on to answer for the €363 million claim.

The €363 million claim is the tip of the iceberg of a story of massive fraud that took place in southern Italy, where over 13,000 bondholders had their savings wiped out.

Investors in the Neapolitan province of Torre del Greco have protested the loss of their investments following the €800 million fraudulent bankruptcy of shipping giant Deiulemar.

In July 2014, seven members of the three founding families of ship-owner Deiulemar were jailed for up to 17 years for illegal financial transactions as the company collapsed. It was declared bankrupt in 2012 owing more than €800 million.

They were found guilty of fraudulent bankruptcy, having transferred their assets to Maltese, Swiss, and British Virgin Islands trusts to avoid their exposure to creditors and the 13,000 retail investors from Torre del Greco who subscribed to their bonds.

The European Court of Human Rights had turned down BOV’s claims of unfair treatment in Italy, because the bank had not exhausted all its remedies in Italy.

The bank had complained it was being denied a fair hearing in the courts of Torre Annunziata, a small provincial town where the majority of creditors seeking compensation from BOV originate.

BOV CEO Rick Hunkin had told MaltaToday that the bank did not want to drag the case through the various levels of court litigation, as it wanted to be clear of this “shadow that has been hanging over the bank for a number of years”.

He said the bank was intent on settling the case out of court, despite sticking to its stand that it had no blame and played no part in the decision-making that led the investors to lose their money.