Issue link: https://maltatoday.uberflip.com/i/1156727
5 maltatoday | SUNDAY • 18 AUGUST 2019 MATTHEW VELLA THE owners of the internation- al bank IIG Malta are implicat- ed in a multi-million lawsuit in a New York court, accused by a bank in the Caribbean island of Curacao of unjust enrichment in a $93 million loan 'scheme'. Until recently, IIG Malta was itself implicated in the case, ac- cused of having acquired a line of credit from Girobank with- out paying back the money be- ing loaned. But since the case got under- way, IIG Malta is no longer directly one of the defendants, and instead it will be its ulti- mate beneficial shareholders – David Hu and Martin Silver – who have to answer to the accusations of Girobank. The bank says that Hu and Silver, as owners of the Internal Investment Group LLC – and directors of the Malta bank – acquired a controlling interest in Girobank, to extract loans from the bank without paying the money back. As a result of the "widespread fraudulent scheme", Girobank says that its financial position significantly deteriorated, and was placed under an emergen- cy measure and finally under control of the Central Bank of Curacao and Sint Maarten. The bank says that IIG Group made false representations in a bid to have its investment fund Trade Opportunities Fund (TOF) and a subsidiary, ac- quire a controlling stake in Girobank, to use the bank's liquidity for loans and pay out TOF's own creditors. Girobank says that although touted as its flagship fund, IIG's TOF had struggled after the 2008 financial crisis and approximately 70% of its inves- tors were demanding their in- vestments to be redeemed. "To improve TOF's finan- cial position… Hu and Silver sought a deep pocket partner to which they would sell their trade finance loan portfolio, much of which was stale and defective, and reinvigorate TOF with new liquidity to pay off TOF's disgruntled inves- tors." Crucial in the prospective sale was Girobank director Eric Garcia, who wanted to sell the majority shareholder Total- bank's stake in Girobank, to IIG. Since then, Garcia, 78, has been sentenced to four years in a Curacao prison for the embezzlement of $11 million, forgery and money laundering in a phoney mortgage scheme and for preparing a false bank- ruptcy report. Apart from Totalbank's own- ership (58%) of Girobank, the bank was owned by the Cu- racao civil servants pension fund, and the Stip founda- tion. Garcia brokered the 2010 meeting in which IIG con- vinced Girobank shareholders of its trade finance loan port- folio and its strict controls and extensive due diligence. Based on these representa- tions, Girobank sharehold- ers and the Central Bank ap- proved the acquisition. The heart of the court case is the agreement between Gi- robank and TOF, for the bank to purchase partial interests in the trade finance loans that TOF and IIG Capital managed. According to Girobank, Garcia used his influence to overrule Girobank's account managers when they started to realise that TOF and IIG Capital were buying participation interests in loans that Girobank manag- ers had rejected. Girobank later discovered a letter written by IIG owner Martin Silver from June 2010, in which he explained that the Girobank acquisition would provide "rapid liquidity" to repay investors in TFP – a Panamanian company which shared investments with the TOF fund. Indeed, one of Girobank's loans was made to a TPF in- vestor, the Ontario Teachers Pension Plan Board, for a to- tal €67 million. "Specifically, defendant Mr Hu instructed Girobank to wire payments to Ontario ostensibly for the pur- chase of participation interests from TOF… Girobank did not understand that it was paying an investor in a separate hedge fund on a separate debt… in this way Mr Silver's statements on the June 2010 letter were realised: by arranging for Gi- robank to pay Ontarioa, Mr Sil- ver, Mr Hu, TFP, IIG LLC, and others used Girobank's liquid- ity or cash, to benefit Ontario and TFP, entities with whom Girobank has never done busi- ness and who are complete strangers to the bank." Girobank also accused Hu and Silver of having advanced loans to borrowers in Vene- zuela, a very risky jurisdiction; and that many of the borrow- ers had defaulted without IIG Capital having given notice of the defaults, without Girobank allowed to seize any collateral for the default. Girobank also claimed that the defendants used the Malta bank to secure a credit line from Girobank to purchase trade finance loans for IIG Capital. Yet since then IIG Bank's lawyers have said that they have reached an agree- ment with the plaintiffs to dis- continue their case against the Malta bank. The Malta bank had denied being involved in any alleged scheme and said that it did not participate in the transactions at issue. Malta Bank said that it and several other entities are wrongly named in the proceed- ing as defendants. NEWS A great opportunity: To join the Office of the Permanent Secretary (Strategy & Implementation) within the Office of the Prime Minister and build a career in Project Management in a dynamic highly professional working environment. Selected candidates will gain an attractive salary package and career development commensurate with their qualifications. The Office of the Prime Minister is receiving applications for the post of; Senior Manager (Projects) Candidates that have not yet obtained the specified requisites will still be considered subject that evidence is submitted that they would qualify by the 19 th August 2019 at noon (CET). Application can be submitted through Online Government Recruitment Portal on http://recruitment.gov.mt by not later than noon (CET) of Monday 19 th August 2019. Further information can be obtained by visiting the following website www.opm.gov.mt or by sending an email to human-resources.opm@gov.mt Malta bank off the hook but $93m New York suit hangs on IIG owners Jailed: Girobank director Eric Garcia