A CONFLICT of interest threatens to taint the findings of a long awaited report on the stock exchange fiasco.
Costas Mavrides, one of two experts hired by the House Finance and Watchdog Committees to collect evidence on the 1999-2000 fiasco in which thousands of investors lost millions on the inflated stock market bubble, is currently involved in a court case with the finance house Euroinvestment & Finance, which is seeking damages of £129,000 from him. Mavrides is counter-suing Euroinvestment for an equal amount, plus an extra £250,000.
The case revolves around an account opened in July 1999, which provided loans for investment on the stock exchange.
Provisions in Mavrides’ defence statement, submitted on September 26, 2003, mirrored statements made by the House Watchdog Committee chairman, Christos Pourgourides regarding the legitimacy of the loans issued during that period.
Last Thursday, Pourgourides advised the thousands of investors who lost money during the fiasco to halt loan repayments, even if they were being taken to court for arrears. He claimed bank loans for the purchase of shares in 1999 breached Central Bank directives. His comments came after the House Finance and Watchdog committees accused brokerages of giving out unauthorised investment loans and commercial banks of surpassing loan limits set by the Central Bank in 1999.
When confronted, the Watchdog Committee chairman said he was unaware of the court case but admitted: “it may well be a conflict of interest if he is personally involved”.
Pourgourides claimed his advice last week was only partially based on the opinion of the two House experts. However, he said: “My opinion is that it may well be a conflict of interest. If you are personally involved and you have a personal gain from the outcome of a certain matter, then a conflict does arise”.
The DISY deputy said he would investigate the matter further today before deciding the next step.
However, he maintained his advice to investors not to pay so that everybody would come to negotiating table and bang out a solution based on what he claims are three undisputed facts:
“First, everybody has admitted and declared, including the directors of the big banks, that the public was defrauded as a result of what happened in the stock exchange during 1999 and 2000.
“Second, the directors of both big banks, Laiki and Bank of Cyprus, made repeated public statements to the effect that their shares, even at a value of £12 or £13 per share were very low and that they expected their shares to rise even more sharply and much higher than that.
“And three, many loans are undisputedly illegal because they were given to people to buy shares when the agreements signed between investors and banks were hire purchase agreements, i.e., not meant for shares.”
Pourgourides pointed out that the latter issue meant that banks could charge interest as high as 16 per cent, compared with the nine per cent limit set by the Central Bank at the time.
“To these three undisputed facts one must add another important fact which was that many loans were given in excess of limits set by the Central Bank; that was an illegal activity. Whether that affects transaction to the extent that it would be declared void by the courts is neither here nor there, but there is something seriously wrong when that happens.”
Pourgourides said that according to his figures, 90 per cent of loans given during 1999-2000 were given in excess of limits in order to finance the purchase of shares.
The final report is due out before the end of the year.
