THE GOVERNMENT has no intention to present a package deal in favour of the public regarding the stock exchange fiasco of 1999-2000, because it has to much to lose, especially the £1.3 billion it made in taxes, the Chairman of the investors association (PASEHA), Demetris Hadjipapas, accused yesterday.
The Chairman was asked to comment on a statement by Finance Minister Marcos Kyprianou, which highlighted that money for a solution to the long-standing problem would not come from state funds.
“The government said it would not pay a single cent. This is not a surprise to us. It just confirmed what we believed to be his policy. It confirmed our fears. We didn’t trust the election promises made by this government anyway,” said Hadjipapas.
Last June, the government revealed a plan in which the state would pay 40 per cent of investors’ debt to the banks by issuing 10-year bonds, while banks would be asked to write off around 30 per cent and the investors would pay the rest.
Asked if he though this was still in the pipeline given the minister’s latest comments, Hadjipapas replied: “The plan was given just to calm some people. But they are trying to trap people.”
In the plan, investors would have to relinquish their shares to a special body set up by the government to manage the situation. The idea was that in 10 years the shares would have increased in value so the government could pay back the 40 per cent to banks when they came to redeem the bonds. Investors would then pay off the remainder of the original loan in the form of long-term loans to the bank.
“In the plan, if the new body makes any losses from the shares it acquires, it will call investors to pay back after five or 10 years. But, if the body makes profits, it will pocket them,” said Hadjipapas.
“The government is a government and it has continuation, it doesn’t stop. The previous government pocketed £1.3 billion from this fiasco, through taxes, fines and indirect forms of taxation,” the PASEHA chairman claimed
Hadjipapas said he had Inland Revenue papers to prove that the government had extracted that amount through taxes from the stock exchange between 1999 and 2000.
“In 1999, they made £650 million from the profits declared by public companies that floated on the stock exchange, and £363 million in 2000,” he said. “They also made money from fines, transaction duties and dividend profits,” he added.
Hadjipapas maintained the government allowed companies to present inflated profits to attract investors, happy to take the tax the profits that were declared.
“This £1.3 billion was raised by allowing misrepresentation and allowing companies to float that were no better than your average kiosk. They have to give this back.”
However, Hadjipapas believed the government had an even bigger role to play.
“During that period, the government was going round saying the stock exchange is excellent, you can make money from it, it will keep going up, and telling people to go ahead invest at a time when the index was 500. The government were effectively calling people to gamble. You cannot blame the people. You can only blame those who knew what the stock exchange meant.”
Hadjipapas called on investors to take the matter to the courts. “The Finance Minister is chewing his words. He said he wont give a cent… but who will pay? These cases have to go to court.”
The courts have already ruled that loans given as hire-purchase to buy one thing but knowingly used to purchase shares would be rendered void for illegality, claimed Hadjipapas. Banks are allowed to charge 16 per cent interest on hire purchase agreements compared to nine per cent on regular loans at the time.
“They know definitely that Hire Purchase loans will fail in court. The banks will not get a single penny. The court has already given opinion on that. There is a mild difficulty regarding the outcome of regular loans. And there is no court decision yet on investor accounts, but there is case law from abroad.”
Hadjipapas was adamant: “This must be solved in court. We are telling people to go to court and try it. Any plan the government comes up with will not favour the public.”
A large group of investors already plans to take the banks to court and with a very strong case, he said.
“We have everything in our hands. That’s why we are so firm in asking people to take them to court. Already a group of 200 people will be putting an application to court in the coming days,” he said.
