My short letter (TMIS 29 September with the same heading as above) was intended to be my final say on this saga insofar as the print media is concerned. However, Pierre Ugolini and Richard Nun found it necessary to return to the fray (TMIS, 10 November ‘Curmi’s last stand?’). In view of certain inaccuracies and distorted statements made by them, I am constrained to write so that readers will not be left with any illusions. For reasons explained in this article, this will definitely be my final input on the subject.
Remuneration for services rendered
It took the foreign experts no less than six weeks to come back. I do not imagine that this is because Ugolini was busy checking his records to ascertain the amount of Euros he derived over the years from his services to the Malta Financial Services Authority (hence the Malta government). In response to what I had said regarding Ugolini in my above-mentioned letter, the experts now allege that ‘any compensation we have received has been minimal’.
The point made by me, and I remain of that view, was that – certainly in his case – Ugolini cannot claim to be an ‘independent expert’. This is because, according to a report that appeared in the media (which, as far as I know, he never disputed) way back in 2012 (ie a good three years before I submitted my affidavit in court as a result of which he, plus two others, were engaged to give the Attorney General a helping hand), he had been paid by then as much as €131,143 since 2009 (€57,276 of which in that year alone) for services given through direct orders from the MFSA. It appears that this remuneration had nothing to do with advice on the NBM issue and that in 2015 he had already been on the payroll of a government quango for some years. Therefore, he cannot claim to be an independent expert in a court case against that same government.
The indications are that the services of Ugolini, Nun and Larry Chilton (the latter has faded out of the picture) were sought by the government on the NBM issue after the payments quoted above were made. I remain amazed that the government resorted to no less than three foreign experts instead of engaging – surely at much lesser cost – one or more Maltese from the large body of competent persons available locally with wide experience in banking and accountancy. Insofar as I am concerned, if – during my lifetime – I have the satisfaction of seeing NBM shareholders being awarded fair compensation by the court, whatever remuneration might come my way will be donated to a charity of my choice.
The amount of compensation proposed and ‘creative accounting’
The experts wrongly assert that I used ‘creative accounting’ to arrive at a figure of €400 million by way of possible compensation to the NBM shareholders. Firstly, this figure was never mentioned in my affidavit and is a figment of the foreign experts’ imagination. They seem to have become confused with the figure I quoted (not an estimate but an actual amount) of the total monetary benefits derived until 2014 by the government from its shareholding in Bank of Valletta.
Secondly, in my report to the court I highlighted four different important elements (to each of which I gave an indication of value) which, in my view, had been ignored when assessing the NBM’s value as at 31.12.73 and which had a material impact on the value of the bank. My views were supported by figures and opinions which have evidently irked the foreign experts.
What was certainly a case of ‘creative accounting’ was the device used by BOV’s wholly-owned subsidiary Cotswold Developments Ltd which, as I explained in one of my previous articles, resulted in making excessive Non Performing Debts provisions in an attempt to justify a 151 per cent increase (from Lm2.4 million to Lm6 million) in the provisions already made by the NBM! I remind readers that the inflated provisions were reduced from Lm6 million to Lm4.3 million by BOV within four years. Moreover, in its first nine months of operations, BOV made pre-tax profits of Lm1.1 million and this from what the foreign experts claim was a ‘failed bank’ that retained virtually the same staff and branch network!
In the conclusions of my affidavit I was careful not to make a claim for a specific amount of compensation on behalf of the shareholders. Apart from the fact that this did not form part of my brief, I considered it prudent that, having expressed my opinion, it should be left to the Court to decide on the compensation amount. It will be recalled that, in deciding in favour of the plaintiffs in October 2014, the Constitutional Court (Civil Appeal) had decreed that value had indeed passed, without compensation, from the NBM shareholders to government for the eventual benefit of BOV.
The loan to B Tagliaferro & Sons
In referring to the NBM’s loan to this company the foreign experts were certainly economical with the truth and guilty of serious omissions. Readers should be reminded that the loan was created as a result of the fusion of Tagliaferro Bank with the NBM in 1969 (four years before the run on the Bank in 1973) and that the loan – being what is technically known as a prohibited transaction unless approved by the Ministry of Finance in terms of law – was indeed approved by the then Minister and was closely monitored by the Central Bank of Malta (as the regulatory authority for banks at the time) through compulsory monthly reports.
What the foreign experts failed to say is that the loan was fully secured by immovable property and was duly repaid in full by the Tagliaferros notwithstanding that the burden was increased by interest being raised unilaterally by BOV to 8 per cent from 6 per cent as was originally agreed with the NBM. All this is documented in two affidavits submitted to the court by the Tagliaferros and which the experts conveniently ignored. BOV had made a provision of Lm160,000 against this loan. This superfluous provision alone accounted for 63 per cent of the NBM’s so-called net deficit of Lm253,000!
Comparison with Northern Rock
I dispute the foreign experts’ comparison between the NBM and Northern Rock (in the UK). This is a favourite attempt by them to confuse the issue by not comparing like with like. In previous articles they even quoted the case of Lehman Brothers (USA) and Barings Merchant Bank (UK). In all three cases these banks failed not in any circumstances similar to those faced by the NBM in 1973.
In the first mentioned case, the root cause was an excessively high level of long-term, mainly sub-prime, mortgage lending which proved to be unrecoverable (a classical case of a bank borrowing short from depositors and lending long to loan takers creating a liquidity crisis running into hundreds of millions of pounds when there was a run on the bank).
In the second instance, the cause was a massive investment in junk bonds and sub-prime speculative financial instruments. With regard to Barings, a rogue currency trader laid open the bank – without the necessary authority – to a huge exposure of speculative currency dealings which, on closure with the counter-parties, created losses so huge that the bank’s entire equity was wiped out. These are facts not fiction Ugolini and Nun!
Choice of words
The experts have taken umbrage at my using the words ‘arrogant’ and ‘audacious’ in their regard. I consider these to be appropriate and certainly far less damaging than their assertion that what I have been writing concerning the government’s take-over of the NBM in 1973 is mere fiction and, what is even more offensive – indeed libellous – is their assertion that I made false statements.
Illiquidity and insolvency
As I have explained adequately in previous articles why I totally disagree with the foreign experts’ opinion that the NBM was both illiquid and insolvent, I will not comment further on these issues. I presented in court figures and charts to prove my point and I will gladly draw attention to these if I am called upon by the recently court-appointed panel (see below) to substantiate my contentions.
Conclusion
As I indicated at the beginning of this article this is definitely my final input in the written media on this saga. This is out of respect to the court-appointed panel of three local experts who have finally been appointed to assess the submissions from both sides made during the outstanding court case for compensation and then to report back to the presiding Judge. This welcome news reached me only shortly before publication of the foreign experts’ article published in last Sunday’s TMIS issue.
I am pleased to see that good sense has prevailed in the end as, had the Attorney General had his way, yet more foreign experts would have been included in this panel. His insistence on this resulted in court proceedings being stalled by over two years until a compromise was recently finally reached on the composition of the court-appointed panel.
It is to be noted that, out of five possible local professionals proposed by the lawyers of NBM’s shareholders, only one name was included in the three-member panel. I sincerely hope that, as is my intention, the foreign experts will now allow the members of the panel to work with tranquillity and not continue giving readers prejudiced opinions when it is so evident that their claim of being ‘independent’ experts does not hold water.
Finally, in answer to the question chosen by them as a heading for their article, I say, yes, I am back with my last stand with regard to article writing, but my crusade to strive for justice to be done with NBM shareholders after more than 45 years is not at an end. Indeed, I relish the opportunity – if called upon by the panel members – to justify or clarify my contentions and in the course of this to provide any further information that may be requested by them.
Mr Curmi headed Barclays Malta’s operations at the time that these were assumed by Mid-Med Bank in 1975. He was appointed the first General Manager of that bank and resigned in 1980 when he assumed a senior executive post with Barclays in London and, later, as that Bank’s Group General Manager in Italy based in Milan