The Proton Bank scandal has not received due attention, either in local or international media, largely because of the distraction of the economic crisis in Greek and the resulting unrest.
In late March, Greek prosecutors filed felony charges against Lavrentis Lavrentiadis over a massive embezzlement scandal that involved more than €600 million in bad loans and led to the downfall of Proton Bank, which was effectively nationalized in October.Prosecutors formally charged the 39-year-old businessman with being part of a criminal gang that embezzled Proton funds and defrauded the government. He faces life in prison if convicted, along with 27 other suspected associates.
Proton Bank head Lavrentios Lavrentiadis has been indicted for embezzling €51 million, though that amount is likely ten times larger when figuring in all the commercial transactions involved.
Businessmen with interests related to Lavrendiadis’ companies used the bank and citizen deposits as their personal investment fund. Tens of millions in preferential loans were granted to a small circle of Lavrendiadis’ acquaintances. These funds were used, among other things, to purchase stakes in Alapis pharmaceuticals and Alapis subsidiaries. According to the investigation, mismanagement of the Alapis investment cost €20.1 million after Proton Bank funded the acquisition of the company’s subsidiaries.
Deutsche Bank served as adviser to the restructuring of Lavrentiadis’ holdings, advising him to sell his businesses and concentrate on the pharmaceutical manufacturing sector, which is expected to develop after the serious reform of the public health insurance system. The sale was non-transparent.
According to the Greek central bank, Proton Bank provided €524 million for the purchase of subsidiaries, €490 million of which was transferred to Alapis.
Let’s take a look at the suspect acquisitions, all of which took place in a span of two days, from 7-9 June 2010:
- On 9 June 2010, Rovinvest, owned by Sofoklis Rovic, acquired two companies, Provet and Veterinary Supply, with funds from a bond issue worth €57.6 million. The funding request was issued to Proton Bank on 8 June, via fax, and the funds released the following day.
- On that same day, the acquisition of Alapis
Medical & Diagnostics by Νovo Atreus was funded. Novo Atreus was owned by
Yannis Bailan, who opened the company with the help of notary Catherine Peleki,
the wife of former New Democracy minister George Voulgarakis and herself
involved in previous financial scandals, notably the Vatopedi scandal.
- A company named Medic was purchased by First Aid
Care, which had been established just days before the transfer by Antonis
Rogopoulos, CEO of Kareyskaki SA, which manages the football stadium of
Olympiakos FC and is 50% owned by Lavrentiadis. The acquisition was funded with
€60 million from Proton Bank.
- Devtec, owned by Pantelis Davatzis, a long-time
acquaintance of Lavrentiadis, also borrowed €57 million from Proton to buy Alapis
group company Gerolymatos Animal Health through Devtec.
- Ballis Personal and Home Care was also purchased
from the Apalis group by Costas Ballis for €75 million in funding from Proton
- Sciens Cyprus Properties & Holdings Ltd was founded
on 24 December 2010 as an offshore company registered in the Cayman Islands.
That same day it submitted a loan request to Proton Bank for €35 million to buy
unspecified real estate. It was only two months later that the reason for the
loan was submitted on paper.
- Proton Bank also lent €3.6 million to Andreas
Rialas, president and major shareholder in On Telecoms in what auditors later
said was a high-risk transaction that initially listed real estate in London as
a security but which was later removed from the loan contract and the loan
granted without securities.
- Proton Bank granted a €320,000 loan to Spiros
Martsekis, deputy general manager of KPMG. Lavrentiadis is the godfather of
Martsekis’ child and as such the loan repayment terms were “favorable”.
- Proton Bank also lent basketball player Thassos Delibasakis from the Panionios team €650,000, which he was unable to repay. A Proton Bank founder, Elias Lianos, is also the main shareholder in the Panionios basketball club.
Deutsche Bank, which was responsible for the internal financial control over the transactions, was taken to task by the Greek central bank for failing to initiative proper oversight and recording insufficient information. Deutsche Bank records fail to provide sufficient data for the business plans of the companies that borrowed from Proton. There was no attempt to demonstrate expected cash flows or to meet the standard requirements for these loans, let alone to demonstrate ability to repay the loans.
Note: We will continue to follow developments in this case.