Bank of Valletta, VFM deny responsibility for €50 million property fund depletion

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The bank denied accusations made against it that it did not secure the due diligence necessary when it invested in the Belgravia property funds, that were subsequently investigated over fraud by the Jersey police and suspended by the Jersey financial regulator.

The Multi-Manager Property Fund, which is managed by Valletta Fund Management, itself owned jointly by BOV and Insight, invested money in what should have been the best pick of real estate property funds from around the world.

Bank of Valletta are facing claims of having overlooked serious shortcomings in a property fund once valued in excess of €84 million, and which today has been depleted by major losses to the €30 million – of which only half are liquid.

Hundreds of Maltese retail investors are believed to have had their investments reduced to less than 25% of their initial investment. A detailed judicial protest filed by Finco Treasury Management claims BOV was not transparent with shareholders when it failed to disclose that the Belgravia fund’s directors were being criminally investigated for fraud by the Jersey police, and that its shares had been suspended by the Jersey Financial Services Commission.

In its reply, BOV said that in 2007 and 2008, the international financial markets “passed though a crisis whose proportion had no precedent – a crisis that hit property markets which have not yet recovered. It was this crisis that impacted market confidence…”

The bank said that VFM carried out the necessary due diligence before it invested millions in the Belgravia funds, and refuted allegations of a negative record of the company in other operations such as Glow Telecom and Fix Telecom.

It added that VFM had kept its investors informed of all that was happening with the funds, from August 2008 onwards, citing a total of 14 letters sent to shareholders.

Then in July 2010, the La Valette Funds Sicav plc held a class meeting for investors to authorise the use of a side-pocket of the fund. “This is clear evidence of the unfounded allegations of the claimant, since VFM gave information in a transparent and open way.”

It also said that VFM had informed investors that it had received notice that Belgravia Asset Management was in liquidation.

In reply to claims that it did not respect its own investment restrictions, by investing into a fund with a gearing ratio higher than 100%, BOV said that it was legally permissible to overcome the investment restrictions for six months; and that trading had already been suspended by the time BOV could have learnt of any violation of the gearing ratio by Belgravia European Property Fund.