Insight: Why did Cypriot banks keep buying Greek bonds?

This was published on Reuters.com

A man walks past a branch of Bank of Cyprus in Nicosia March 31, 2013. REUTERS/Yorgos Karahalis

By Michele Kambas, Stephen Grey and Stelios Orphanides

NICOSIA | Tue Apr 30, 2013 9:45am EDT

(Reuters) – One day last October, a memory stick containing special software for deleting data was placed into a desktop computer at Bank of Cyprus.

Within minutes, 28,000 files were erased, according to investigators who had wanted to copy the data for an official report into the collapse of the Cypriot banking system.

The deleted files included emails sent and received in a crucial period in late 2009 and early 2010 when Bank of Cyprus, the biggest lender on the island, spent billions of euros buying Greek bonds - at a time when international banks were cutting exposure to the heavily indebted Athens government.

Those Greek bonds lost most of their value in last year’s EU-sanctioned bailout, playing a key role in plunging Cyprus into an economic maelstrom. When banks turned to Cyprus’s own cash-strapped government for help in plugging holes in their balance sheets, Nicosia too needed an international rescue.

Now people in the small euro zone republic, who have lost money and face years of grim austerity, want to know who decided to plough their savings into the doomed public accounts of their bigger neighbor, and why. But answers are proving elusive, not helped by the mysterious wiping of data at Bank of Cyprus. (more…)

Special Report: Greece’s triangle of power

This first appeared on Reuters.com
A presidential guard marches by a newspaper stand featuring news about Greece's election results in Athens in this June 18, 2012 file picture. REUTERS-Pascal Rossignol-Files
A nexus of media, business and politics lies behind the country’s crisis, say critics.

By Stephen Grey and Dina Kyriakidou

(Reuters) – In late 2011 the Greek finance minister made an impassioned plea for help to rescue his country from financial ruin.

“We need a national collective effort: all of us have to carry the burden together,” announced Evangelos Venizelos, who has since become leader of the socialist party PASOK. “We need something that will be fair and socially acceptable.”

It was meant to be a call to arms; it ended up highlighting a key weakness in Greece‘s attempts to reform.

Venizelos’ idea was a new tax on property, levied via electricity bills to make it hard to dodge. The public were furious and the press echoed the outrage, labeling the tax ‘haratsi’ after a hated levy the Ottomans once imposed on Greeks. The name stuck and George Papandreou, then prime minister, felt compelled to plead with voters: “Let’s all lose something so that we don’t lose everything.”

But not everyone would lose under the tax. Two months ago an electricity industry insider revealed that some of the biggest businesses in the land, including media groups, were paying less than half the full rate, or not paying the tax at all. Nikos Fotopoulos, a union leader at power company PPC, claimed they had been given exemptions.

“It was a gift to the real bosses, the real owners of the country,” he said. “The rich don’t pay, even at this time.”

This time the media made little fuss. “The news was not covered by the media … because media owners were among those favored,” Fotopoulos said later. Leading daily newspapers in Athens either did not mention or downplayed his claims, a review by Reuters found.

To many observers the episode illustrates the interplay between politics, big business and powerful media owners. The interwoven interests of these sectors, though not necessarily illegal or improper, are seen as an obstacle to Greece’s attempts to rescue its economy. They are, say critics, partly to blame for the current crisis and for hindering reform.

(more…)

Special Report: Clandestine loans were used to fortify Greek bank

 

CEO of Piraeus Bank Michael Sallas addresses reporters during a news conference in Athens in this July 15, 2010 file photo. REUTERS-Yiorgos Karahalis-Files

By Stephen Grey and Nikolas Leontopoulos

ATHENS | Mon Jul 16, 2012 6:51am EDT

(Reuters) – The chairman of one of Greece’s largest banks and his family took out loans totaling more than 100 million euros to finance an undisclosed stake in the bank, according to audit documents seen by Reuters.

Offshore companies owned by Michael Sallas and his two children paid for shares in the Piraeus Bank, the country’s fourth-biggest, by borrowing money from a rival bank.

Together the shares make the Sallas family the largest shareholder in Piraeus, with a combined stake of over 6 percent. The purchase of these shares has not been declared to the Athens stock exchange by Piraeus.

The loans to Sallas, who was executive chairman of Piraeus Bank until last month and remains its non-executive chairman, raise new questions about the stability and supervision of the Greek financial system at a time when European taxpayers and the International Monetary Fund are bailing out its banks with more than 30 billion euros.

The IMF had no comment on the issue, and a spokesman for the Bank of Greece declined to comment on Sallas’s holdings in Piraeus, citing banking confidentiality guidelines. “Our supervision department cannot comment on specific prudential data available or actions taken with regard to any specific bank as such information is confidential,” he said.

According to audit reports seen by Reuters, most of the money borrowed by companies linked to Sallas was used to buy shares in a Piraeus Bank rights issue in January 2011. The issue was designed to strengthen Piraeus’s capital base.

The disclosure highlights concerns that Greek banks have been borrowing money from each other and using it to meet recapitalization requirements, but not making that clear.

“This (the Greek financial system) is a closed circuit, operating as a system of power with no transparency and effective supervision,” said Louka Katseli, professor of economics at the University of Athens and former Greek minister of economy. “Through triangle deals between banks, businessmen and other banks, capitalization requirements were fulfilled without new money injected.”

Piraeus Bank and Sallas declined to answer specific questions for this story, but offered an interview later this month. On Sunday Sallas issued a statement to the Greek media attacking Reuters and accusing the news agency of “slandering” and “undermining” the bank.

READ FULL ARTICLE

Even the paranoid have enemies …

As this story reveals …. I’ve been the subject of some attention in Athens.

Security firm spies on Reuters correspondent
Thu, Jun 28 12:15 PM EDT

LONDON, June 28 (Reuters) – A private security team was hired to follow and photograph a Reuters special correspondent who has written a series of articles exposing mismanagement in Greek banks.

Stephen Grey, who was in Athens last week for further reporting, was followed to a meeting at a building in the city on June 20.

The unidentified watcher waited for an hour and a half until Grey emerged. He then followed Grey to the Reuters office in Syntagma Square in the city centre, where the watcher was joined by a second man who arrived on a motorbike.

The two men kept the office under observation for more than an hour, Reuters security staff said.

That evening, Grey held a meeting in the garden of a hotel with two people, one of whom was Tassos Telloglou, a Greek investigative journalist.

As they were talking, a man entered the hotel, made his way to the rear and attempted to take a picture of Grey and his companions through a window. Telloglou noticed the photographer and chased him through the hotel and foyer. When Telloglou caught up with him, the man said he had been paid to track Grey.

He provided the name of an unlicensed private security firm which, he said, had organised the work and was paying him 100 euros per day. It was not clear who had commissioned the security firm.

Grey and Telloglou reported the incident to Greek police.

The man who tailed Grey at the hotel also said his firm was involved in taking photographs of Grey, Telloglou and Nikolas Leontopoulos – a freelance journalist working for Reuters on the investigation into banks – when they had previously met at a private hospital.

“You have no idea how much we’ve been doing,” the man told Telloglou. The photographs from the hospital were passed to Greek blogs.

This year, Reuters has published investigations led by Grey into two banks in Greece – Proton and Piraeus – and Marfin Popular Bank in Cyprus, which has a major branch in Greece. Marfin has now been renamed Cyprus Popular Bank.

Piraeus, one of Greece’s biggest banks, has filed a lawsuit against Reuters, claiming 50 million euros ($62 million) in damages after Reuters published a report about a series of property deals between the bank and companies run by the family of its executive chairman.

Asked whether it had commissioned any surveillance of Grey, a spokesman for Piraeus said the bank “considers the question and its implication insulting and possibly defamatory and, given that we are already engaged in formal legal proceedings against Thomson Reuters, declines to comment further.”

Spokesmen for the former management of Marfin and for the former management of Proton, both of which were the focus of stories, denied any involvement in the surveillance. (Writing By Richard Woods; Editing by Simon Robinson and Matthew Tostevin)

Special Report: How a Greek bank infected Cyprus

A general view of the Vatopedi monastery is seen at Mount Athos, May 27, 2012. REUTERS-Grigoris Siamidis

By Stephen Grey, Michele Kambas and Nikolas Leontopoulos

ATHENS/NICOSSIA | Wed Jun 13, 2012 9:08am EDT

(Reuters) – Like many Greek tycoons these days, Andreas Vgenopoulos is in trouble.

The self-made businessman built one of Greece’s leading corporate empires over the past two decades. Among its jewels was a major bank in the nearby Mediterranean island nation of Cyprus. Then it all started to unravel.

In 2010, Marfin Investment Group (MIG), the firm Vgenopoulos managed which has stakes in everything from privatized national carrier Olympic Air to food giant Vivartia, lost 1.8 billion euros ($2.2 billion). The loss, largely made up of write-downs on goodwill, was the biggest ever for a Greek company to that point. There is a joke in Athens that MIG’s initials stand for “Money Is Gone.”

Meantime the Marfin Popular Bank was a major lender to an order of Greek monks who received swathes of prime state-owned land in sweetheart deals, and who in turn bought shares in MIG. A Greek parliamentary inquiry alleged serious “conflicts of interest” in how bank loans were issued to finance MIG’s wider activities.

Vgenopoulos denies any wrongdoing. But his travails shed light on a factor largely overlooked in the narrative of the Greek economic crisis, which is now threatening to force Athens out of the euro zone and unravel the currency along with it: the debts many Greek banks built up by lending to each other and to associates.

MORE

Special report: A Greek banker’s secret property deals

By Stephen Grey/ From Reuters: Full Report  (PDF VERSION: http://link.reuters.com/nun47s )

He is the former economics professor behind an upstart bank that rode the Greek boom to become a publicly listed heavyweight with a loan book of over 35 billion euros. She is his devoted wife, who oversees the bank’s sponsorship of museums and the arts, and advised it on corporate social responsibility.

Michalis Sallas, executive chairman of Piraeus Bank, Greece‘s fourth largest, and Sophia Staikou are a Greek power couple, symbols of the fast-growth years after the country joined the euro in 2001.

But an investigation of public documents, including financial statements and property records, shows the couple may also be emblematic of the lack of transparency and weak corporate governance that have fueled Greece’s financial problems.

Greek banks will soon be recapitalized with an estimated 30 billion to 50 billion euros, part of the country’s second bailout, backed by the International Monetary Fund and European taxpayers. Analysts estimate Piraeus will take about 3 billion to 3.5 billion euros.

Sallas was put in charge of Piraeus by the government 21 years ago, before the bank was privatized. He owns about 1.5 percent of the bank, whose stock price has plunged 97 percent since its peak in 2007.

But Sallas and his wife and his two children have also run a series of private investment companies that public records show have sealed millions of euros in real estate business with Piraeus, deals that were not disclosed to shareholders.

In wealthy locations in Athens and its suburbs and on at least one Greek island, these companies bought properties with loans from Piraeus and then rented at least seven of the buildings back to the bank, which used them as branches. Piraeus also bought properties from the companies and financed other buyers to buy properties from them.

Among the most unusual deals were transactions involving companies linked to Staikou, Sallas’ children Giorgos and Myrto, as well as key former Piraeus executives. These centered on the sale to Piraeus in April 2006 of three different properties, via three different private businessmen. According to property records, each of the businessmen bought a property for a knock-down price from the family companies and then sold them on to Piraeus for more than double that price. On paper, they generated a 160 percent total cash profit for the men, nearly 6 million euros, within the space of three weeks.

According to real estate and legal experts in Athens, a pattern of quick sales is often used in complex tax avoidance schemes. Such deals are legal if all taxes were paid. But one businessman named in the sales documents told Reuters his name had been used without his knowledge. He had “never owned property in Athens in my life,” he said.

Neither Piraeus nor Sallas would answer questions about the property deals, saying they were unable to do so because of an ongoing legal case against an ex-Piraeus employee. Matthew Saltmarsh, a UK-based spokesman for the bank, told Reuters that Greek banks had become “the most thoroughly audited financial institutions in the world,” and there was no reason to question Piraeus’ governance.

But property records show the deals linked to Sallas were opaque and raise questions about how cleanly the lines between his family and Piraeus Bank were drawn. They also provide a window into some of the often byzantine money-making schemes that characterized what one Athens real-estate agent calls the “crazy times” – the years between the stock market boom in 1999 and the crash in 2009, a span that included Greece’s entry into the Euro and its hosting of the 2004 Olympics.

“It’s nothing compared to what was happening back then,” a businessman who helped run one of the Sallas’ family companies said of the property deals. “It would be unfair to limit your research to Sallas and Piraeus. Everybody in the business knows that there are other banks that used similar tricks to do much worse things than buying and selling a bank branch.”

“This period of time was a crazy party for some.”

FULL ARTICLE

Special Report: Iran’s cat-and-mouse game on sanctions

Here’s another REUTERS Special Report that I helped put together:

By Rachel Armstrong, Stephen Grey and Himanshu Ojha

SINGAPORE | Wed Feb 15, 2012 8:30am EST

SINGAPORE (Reuters) – Just before noon on a sticky, overcast Saturday morning earlier this month a truck carrying two white containers waited at an electronic checkpoint to leave Singapore’s main port. The containers bore the bright red letters IRISL, the initials of Iran’s cargo line, which has been blacklisted by the United Nations, United States and European Union.

Anchored just off Singapore’s playground island of Sentosa that same day, the container ship Valili was also stacked high with IRISL boxes. A couple of miles to the east the Parmis, another container ship, also carried IRISL crates. Shipping movements data tracked by Reuters shows the Parmis had pulled into Singapore waters from the northern Chinese port of Tianjin early that morning.

The ships and containers are key parts in an international cat-and-mouse game, as Iran attempts to evade the trade sanctions tightening around it. Washington and European capitals want to stop or slow Iran’s nuclear program. They believe Iran Shipping Lines(IRISL), which moves nearly a third of Iran’s exports and imports and is central to the country’s trade, plays a critical role in evading sanctions designed to stop the movement of controlled weapons, missiles and nuclear technology to and from Iran.

IRISL would not comment for this story. Last June the company said in an interview that there was no evidence it had been involved in arms trafficking. Iran says its nuclear program is peaceful and that IRISL has no links with any weapons program. Tehran complained vigorously last June when the European Union followed the United States with beefed-up sanctions that banned new contracts with IRISL. A United Nations resolution forces all states to inspect IRISL’s cargo.

But many in the West hold up IRISL as exhibit A for Iran’s ability to evade sanctions because the shipping line regularly reflags its ships and changes their official owners.

An analysis of shipping data sheds new light on that deception. Using data from IHS Fairplay, a ship tracking group that uses ship registration documents from various sources, and Reuters Freight Fundamentals Database, which compiles location data from every ship’s Automatic Identification System, shows that despite the sanctions 130 of the 144 banned ships in IRISL’s fleet continue to call at many of the world’s major ports hidden behind a web of shell companies and diverse ownership.

Dozens of Iranian ships have used Singapore several hundred times in the past two years, for instance, as a stop-off on their way to other destinations such as China.

The data shows that in the 48 months before U.S. sanctions began in September 2008, IRISL made 345 changes to its fleet including names, the flags ships sailed under, operators, managers and registered owners. In the 40 months since sanctions began there have been at least 878, including 157 name changes, 94 changes of flag, 122 changes of operator, and 127 changes of registered ownership.

(more…)

Special report: Greece claims magnate stole from his own bank

A REUTERS special report

By Stephen Grey    ATHENS | Thu Jan 12, 2012

ATHENS (Reuters)- With the money tight all over Europe, one high-flying Greek businessman allegedly found a novel way of getting easy credit: two years ago he bought a controlling share in a bank, installed his own managers and then loaned himself and his associates nearly 600 million euros ($760 million).

Greek prosecutors allege Lavrentis Lavrentiadis, 39, turned the country’s Proton Bank, which has since been nationalized, into what one Athens newspaper called a “bank of cronies.” Lavrentiadis, who vigorously denies the allegations and has accused the authorities of acting illegally, has been called to appear before public prosecutor Ioannis Dragatsis at an Athens court next week. He is formally under investigation over accusations of fraud, embezzlement and corruption, but has not been charged.

An audit by the Bank of Greece, which regulates the industry, found that more than 40 percent of Proton’s commercial loans in 2010 were made to companies related to Lavrentiadis. The report says this was part of a “misuse of the basic principles of lending and assurance.”

A separate investigation, signed by a senior prosecutor who heads the country’s money laundering authority, found that Lavrentiadis – once hailed as the rising star of Greek business and known as a leading patron of the arts – had with others “formed a criminal team” that embezzled up to 51 million euros from the bank. It alleged loans made to dormant companies had been wired from Proton to another bank, the Piraeus Bank, and then withdrawn by an employee in bags of cash.

“In every case the leading figure of the team was Lavrentis Lavrentiadis, president of the board and major shareholder in Proton Bank,” says the confidential report by Greece’s Financial Intelligence Unit (FIU), seen by Reuters. The bank’s management “developed continuous, intense and to a great extent criminal activity which led to the deception of depositors.” The bank used “unusually high interest as a bait” to draw savers in, it stated.

The secret report was completed on July 27 last year, but its full findings have not been disclosed until now.

(more…)

I just handed in my notice, to myself

Well, it looks like after years and years of working as an independent freelance, I’m off to join Reuters as a special correspondent, which is a roving role within Europe and the Middle East as part of a wider global enterprise team. It’s an exciting time to join the organisation as they’ve decided to give a real boost to long-form explanatory and investigative work. Serious journlism, in other words, of the sort that is often in short supply. Details announced today in Press Gazette. I’ll start there in December.

Gangsters miss home – adventures in Karachi

While getting rather bored in London, I glanced through some old emails of mine and found this to friends of a trip to Karachi, in Pakistan, dated 16 May 2000. So i publish it here for the sake of amusement> it shows even when you discover almost nothing, the act of searching can be quite interesting.

It was the machine gun that rather betrayed his profession.  It was hanging from his shoulder down to his knees and he strode into my room at the Sheraton. Quite disconcertingly, he was also carrying a bouquet of roses and lilies. The note attached said: “With best wishes from Mr Shakeel”.

For those not familiar with Asian criminals, Chota Shakeel is the brother of what Indian papers like to call the “dreaded” or “notorious” gangster Dawood Ibrahim: the arch criminal master said to be in league with Pakistan intelligence in spreading all kinds of dastardly terror across the sub-continent, including hijacking a jet from Nepal and blowing up the Bombay stock exchange a few years ago and killing a large number of people. (more…)

Page 1 of 11123456»10...Last »

Operation Snakebite

OUT IN PAPERBACK updated edition, OPERATION SNAKEBITE (UK) and INTO THE VIPER's NEST (USA edition) is the story of British and American involvement in the conflict in Helmand, Afghanistan Frontline combat, strategic chaos, political intrigues, the truth about the enemy, and a tale of true heroes .... in the most dangerous place on earth.

The Latest Reviews

"Devastating … It explains why the world's most sophisticated armed forces are being defeated by the world's least sophisticated"- Simon Jenkins, Books of the Year 2009, The Times Literary Supplement

"One of the most courageous and important pieces of reporting of the Afghanistan campaign"- General Sir Richard Dannatt

"Grey tells the story with immediacy, drama and sometimes anger. A gripping and moving narrative"- Soldier Magazine

"magnificent ... a meticulously reconstructed account of the battle for Musa Qala ... frequently more vivid than any film .... confers immense authority ... "- Misha Glenny in the Mail on Sunday

"exemplary...an uncommonly vivid portrait of battle, matched by sharp investigation of purposes, intrigues and cock-ups... " - Max Hastings in the Sunday Times

"superb .... captures the grit and the gore, the exhaustion and emotion, the killing and the dying, the horrors and the heroism... a fine piece of war reporting ..."- Raymond Bonnner in the The Guardian.

"Excellent" - (Daily Telegraph)

"Exceptional"- (New Statesman)

"Fascinating"- (Financial Times)

"enthralling and unvarnished .... a persuasive and thoughtful account of an unwon war" -Glasgow Herald

Illustrated with 8 maps and 65 colour photos. Join the facebook page

Synopsis

In December, 2007, Stephen Grey, reporting for the Sunday Times, was under fire in Afghanistan, ambushed by the Taliban. He was amidst the biggest UK-led operation fought on Afghan soil since 9/11: the liberation of a Taliban stronghold called Musa Qala. Taking shelter behind an American armoured Humvee, Grey turned his head to witness scenes of carnage. Two cars were riddled with gunfire. Their occupants, including several children, had died. Taliban positions were pounded by bullets and bombs dropped on their compounds. A day later, as the operation continued, a mine exploded just yards from Grey, killing a British soldier.

Who, he wondered in the days that followed, was responsible for the bloodshed? And what purpose did it serve A compelling story of one military venture that lasted several days, Operation Snakebite draws on Grey's exclusive interviews with everyone from private soldiers to NATO commanders. The result is a thrilling and at times horrifying story of a war which has gone largely unnoticed back home.