Bank of Cyprus Officials Deleted E-Mails

Two of the beleaguered Bank of Cyprus’ former top executives appear to have deleted critical e-mails to cover their tracks over why they decided to invest heavily in Greek bonds that were later devalued by 74 percent, hitting the state’s banks with 4.5 billion euros ($5.81 billion) in losses and triggering the near-collapse of the island country’s economy.
The charge was made in an investigate report commissioned by the bank, the New York Times reported. The bank losses forced the government to seek a 10 billion euros ($13 billion) bailout from the Troika of the European Union-International Monetary Fund-European Central Bank (EU-IMF-ECB) and confiscation of up to 80 percent of bank deposits in accounts over 100,000 euros ($130,000).
The report seemed to indicate that the officials, former Chief Executive Andreas Eliades, and senior executive Christakis Patsalides were hoping that speculating in the risky bond purchases would prove lucrative and cover huge losses in bad loans given to Greek businesses that failed during that country’s crushing economic crisis. Patsalides was the driving force behind the bond purchases.
The Times said the report found that the computers of both men had “wiping software loaded which is not part of the standard software installations” at the Bank of Cyprus. Both have left the bank and the report noted that Eliades did not “participate or assist” in the investigation, despite being urged to do so by the bank and its outside lawyers.
The revelation may likely trigger new fury in Cyprus as depositors are being forced to pay for bank losses and are barred from withdrawing their money because of strict capital controls. A committee of judges has already been appointed by the government to get to the bottom of the matter.
The report was commissioned by the Cypriot central bank last August, well before the country’s bailout was made final. The central bank hired Alvarez & Marsal, a financial consulting firm, to investigate how and why the Bank of Cyprus had come to make such a high-risk gamble.
Investigators say that from Aug. 12, 2012, the central bank had ordered that all electronic data at the banks be preserved. The report did not say when the file-wiping software on  Eliades’s and Patsalides’s computers was installed.
But investigators did suggest that digital documents could have been erased during the many delays that followed Alvarez’s requests for documents. “Mass deletion of data appears to have been undertaken on the Patsalides computer on 18 October 2012,” the report said.
Alvarez investigators said that, according to the records they were able to secure from the bank, the decision to buy the bonds was based on a last gasp effort by the bank to generate profits as their loan book began to sour in late 2009 and through the spring of 2010.
Investigators also said that the bank, like others in Europe at the time, made use of cheap financing from the European Central Bank to make these bets. As a result, executives in the bank’s treasury department bought the riskiest high-yielding bonds available and found willing sellers in banks eager to reduce their exposure to Greece.