June 6, 2023

Piraeus Bank’s Michalis Sallas Reaches the Top in Greece

But now that he has managed to turn his bank into Greece’s largest, ensuring that Piraeus will be eligible for a bailout from the European Union, Mr. Sallas runs the risk that some of the steps he has taken along the way may come back to haunt him. Those moves include borrowing more than 100 million euros ($132 million) from a friendly banker in a bid to prop up the falling shares of his own bank and making risky loans to people and entities with ties to Piraeus.

Europe is preparing to close the books on perhaps the most ambitious aspect of its plan to keep Greece afloat: a cash injection of about 50 billion euros into the country’s four largest banks.

And bank governance has emerged as a critical issue, with the country’s creditors, who arrived in Athens this week to carry out their latest audit, insisting that continued aid is conditional on banks’ demonstrating that their conduct is above reproach.

Still, Greece’s overseers from the European Union and the International Monetary Fund may well find that even with increased oversight, changing the freewheeling business culture that long defined the Greek financial system will be easier said than done.

The rapid rise of Mr. Sallas exemplifies that culture. A tough, charismatic banker who seized control of Piraeus in 1991 and built it up by dint of more than 15 mergers and acquisitions, Mr. Sallas reached the pinnacle of the Greek banking world in March when he capitalized on Cyprus’s banking disaster, buying the Greek units of that island’s three biggest financial institutions, Bank of Cyprus, Laiki Bank and Hellenic Bank.

His supporters say that Mr. Sallas should be hailed for his entrepreneurial expertise and robust appetite for risk. Seeing an opportunity to reinvent his bank, they say, he has stolen a march on his more sclerotic counterparts.

“He is someone who can really navigate the system in Greece,” said John P. Rigas, a Greek-American hedge fund operator and client of the bank who owns an Athens-based investment company in which Piraeus holds the largest share. “This bank has gone from a teetering No. 4 to a solid No. 1 in just a year.”

But others say that Mr. Sallas has pushed the boundaries of proper banking too far and that his maneuvering in the murky world of Greek finance, where the interests of bankers, the media and politicians often commingle, should be more closely scrutinized.

“Piraeus has long used problematic methods that call for investigation,” said Costas Lapavitsas, a political economist at the University of London who follows banking and politics in Greece. “What concerns me is that Piraeus has emerged as the leading bank in Greece not because it improved these methods. The old regime is just adapting to the new conditions, and for me that is a sign of sickness and not health.”

Anthimos Thomopoulos, deputy chief executive of the bank, said all aspects of Piraeus’s business “have been exhaustively examined by independent auditors and regulators, inside and outside Greece, with no adverse findings.”

A trained economist, Mr. Sallas, who is 62, made his first career strides working under Andreas Papandreou, the Socialist premier who led Greece in the 1980s. In the years since taking over Piraeus his influence has continued to expand. He is close to the governor of the central bank, George Provopoulos, who until 2008 was vice chairman at Piraeus. And the bank is one of the largest advertisers in the Greek media.

Altogether, European governments and the International Monetary Fund have staked about 200 billion euros of taxpayer money on keeping Greece in the euro zone and eventually restoring its economy to health. To justify this commitment, Europe has subjected Greece’s largest banks to a root-and-branch investigation, focusing in particular on related-party lending, or loans to entities in which the bank may have a financial interest, and has concluded that they have finally cleaned up their acts.

Article source: http://www.nytimes.com/2013/06/11/business/global/a-wily-banker-reaches-the-top-in-greece.html?partner=rss&emc=rss

Executives Organized Olympus Cover-Up, Panel Finds

TOKYO — Top executives at Olympus, the Japanese maker of cameras and medical equipment, devised an elaborate scheme to cover up investment losses involving at least $1.7 billion and should face legal action, a third-party panel said Tuesday in a highly anticipated report that called the company’s management “rotten to the core.”

The panel’s findings appeared to vindicate, to a great extent, the company’s ousted president, Michael C. Woodford, who had made public allegations and called for an inquiry into a series of exorbitant acquisition payments made by the company before his tenure. Mr. Woodford has called for the entire Olympus board to resign and has said he is in talks with shareholders to help install fresh management at the company.

The report also highlights the role played by three former Nomura bankers in arranging the cover-up, as well as alleged failings of Olympus’s auditors, especially KPMG’s Japan affiliate, in exposing fraud at the company. It alleges that several banks, including Société Générale, submitted incomplete financial statements to auditors, in effect aiding the cover-up.

“The management was rotten to the core, and infected those around it,” said the report, more than 200 pages long with appendices.

Still, concerns remain over the true independence of a panel appointed by the Olympus board, as well as just how fully a monthlong investigation could have investigated a complicated program involving numerous overseas funds and financial advisers. The panel cleared the cover-up of alleged links to Japan’s notorious criminal underworld, for example, despite acknowledging that it did not know for sure where some of the money ended up or whether individuals had pocketed money.

The possibility of organized crime involvement in the cover-up had become a critical issue in the investigation, as any proof of mob links could wipe out all shareholder value in the company by causing its shares to be delisted from the Tokyo Stock Exchange. The Japanese police are investigating possible links to organized crime, according to several people close to the inquiry.

Tatsuo Kainaka, the panel’s chairman and a former judge of Japan’s Supreme Court, acknowledged that a forensic accounting by Olympus’s auditors, as well as an investigation by the Japanese and overseas authorities, was needed to bring all facets of the scheme to light.

“We do not know for sure where funds ultimately flowed to and how,” Mr. Kainaka said at a news conference after the report’s release. But the panel “could not find any evidence of a flow of funds to organized crime,” he said.

In a separate statement, the Tokyo Stock Exchange warned that the company could still be delisted if it failed to meet a Dec. 14 deadline to submit its latest financial statement. Olympus shares have already lost half their value in the scandal.

According to the report, Olympus executives plotted with several former investment bankers to hide ¥117 billion in losses made from investments that went sour in Japan’s stock bubble crash in the early 1990s.

The company later used a series of acquisition-related payouts to settle those losses, including an outsize $687 million in fees paid to a now-defunct fund incorporated in the Cayman Islands for Olympus’s takeover of a British medical equipment maker in 2008. Olympus also paid $773 million for three companies in Japan that appeared unrelated to its main business, including a face cream maker, only to quickly write down the bulk of their value.

The report denied speculation that those acquisitions had been made solely to cover up losses. However, Olympus executives saw the purchases as an opportunity to hide irregular transactions, the report said.

The report also alleged that Olympus’s auditors KPMG AZSA and Ernst Young Nippon had not done enough to expose Olympus’s financial maneuvers. In 2009, KPMG AZSA raised serious concerns with the company’s recent acquisitions, the report said, but backed down and gave Olympus’s finances the all-clear when the company insisted that a third-party inquiry had found nothing wrong.

Article source: http://www.nytimes.com/2011/12/07/business/global/banks-aided-in-olympus-cover-up-report-finds.html?partner=rss&emc=rss