(Reuters) - The governor of the Bank of Greece was
given a severance payment of 3.4 million euros when he left his former
employer, a major bank that he now regulates, documents seen by Reuters show.
George Provopoulos was awarded the sum when he stepped
down as vice-chairman of Piraeus Bank to become governor of Greece's central
bank and a member of the board of the European Central Bank in 2008. The scale
of the pay-off, previously unknown to most Greeks, is likely to prove
controversial, amounting to nearly 2.8 million euros ($3.6 million) after tax.
As governor of the central bank, Provopoulos, now 62,
has played a key role in propping up Greece's banking system, which has
received billions of euros in liquidity from the ECB and is in line for up to
50 billion euros of new capital from the bailout provided by euro zone
countries and the International Monetary Fund.
The Greek central bank has also faced criticism over
the recent rescue of the country's troubled state-run Agricultural Bank (ATE),
which left-wing Greek MPs described as the "robbery of the century."
In that deal the authorities decided to place ATE's non-performing loans into a
‘bad bank' and hand the rest of ATE to Piraeus.
The Bank of Greece said Provopoulos faced no conflict
of interest from his severance deal and had fully informed the authorities of
the payment. When Reuters sent questions to Provopoulos, the Bank of Greece
legal department responded: "In compliance with the applicable Greek law,
Governor Provopoulos declared the severance payment to all pertinent tax and
judicial authorities."
In a letter to Reuters, Dr Vassilios Kotsovilis, the bank's
legal director, added: "The severance payment, having been agreed upon at
an earlier time and under very different (pre-crisis) circumstances, was
neither of an arbitrary nature nor of an extra-ordinary nature."
Kotsovilis said details of the payment were reported
in "the press and blogs of the period." However, Reuters was unable
to find mention of the payment despite extensive searches in both Greek and
English.
Piraeus, which is suing Reuters over a previous report
about the bank, said in a statement: "In view of legal proceedings... we
consider it inappropriate to comment in any detail."
It added: "It goes without saying that Piraeus
Bank has always fully complied with the rules and regulations governing the
Greek banking sector."
BOARD APPROVAL
Provopoulos, a former chief executive at Emporiki
Bank, Greece's fifth largest bank, joined Piraeus, the fourth largest, on
October 18, 2006. As a vice-chairman and managing director, he was entitled to
a net salary of 580,000 euros, plus expenses and a
bonus.
On May 22, 2008 he resigned from Piraeus after 19
months service. Documents seen by Reuters indicate that, on the day before he
left the bank, its directors approved a severance payment of 2,775,000 euros,
in addition to his pay of 325,704 euros for five months work that year.
The Bank of Greece confirmed the severance payment was
3.46 million euros before tax and was paid to Provopoulos that month. It
amounted to more than two million euros per year of service.
Almost a year later the deal appeared in minutes of a
Piraeus shareholder meeting held on April 30, 2009, which sought retrospective
approval for the payment. Though such shareholder meetings are open to the
press, the payment appears to have passed unnoticed.
Louka Katseli, a former Greek Economy Minister and now
professor of Economics at the University of Athens, was one of those unaware of
the payment, despite being a prominent opposition politician at the time. When
told of the payment this week, she said: "I had no prior knowledge of Mr.
Provopoulos's severance."
George Gougoulis, the president of ESETP, a staff
union within Piraeus Bank, was also unaware of the pay-off to Provopoulos.
"We have repeatedly asked the Bank to disclose to us information about the
way top executives and members of the Board are remunerated, for instance by
stock options, and they have always refused that," he said.
The scale of Provopoulos' payment is notable when set
against what minutes of shareholder meetings record for payments to other
directors who have departed Piraeus. Another vice-chairman, Theodoros
Pantalakis, was on a similar level of remuneration at Piraeus to Provopoulos
and left in December 2009 after working for the bank since 2004. He was given a
pay-off of 470,000 euros, according to shareholder minutes, amounting to less
than 100,000 euros per year of service.
By comparison, Provopoulos' pay-off was three times
his after-tax annual compensation, according to the Bank of Greece.
Pantalakis told Reuters that any payments to him were
"as recorded in minutes of shareholder meetings." His severance
payment may have been lower because of the worsening credit crunch at the time
of his departure. He said of the payment to Provopoulos: "I don't find it peculiar,
I don't have any recollection that something was out of line."
Michalis Colakides, another former vice chairman and
deputy chief executive of Piraeus, left the bank in 2007 after seven years of
service. Piraeus accounts record no severance pay for Colakides that year,
though Colakides told Reuters that he received a payment equal to two years
salary. He declined to comment further.
A spokesman for Piraeus said: "The remuneration
of Piraeus Bank's senior management has been established and duly approved by
all the relevant corporate committees and bodies, in full compliance with all
applicable internal and external regulations and duly recorded as such in the
Bank's financial statement."
In response to Reuters inquiries about Provopoulos'
financial arrangements with Piraeus, the Bank of Greece said that
"detailed answers have been given to the Greek parliament", and other
relevant authorities.
The issue arose in parliament in 2009 because rumors
had been circulating in banking and political circles about a large investment
loss suffered by Provopoulos a few months after he left Piraeus.
In September 2007 he and other senior executives of
Piraeus had taken out loans from the bank to buy shares in a rights issue it
was staging. According to one former Piraeus manager, all senior figures at the
bank were asked to take part when the bank's then executive chairman, Michael
Sallas, announced he would raise 1.35 billion euros by issuing approximately
67m new shares.
"Everyone got a letter that said something like:
‘Here is your allocation of shares. Your loan is pre-approved. Sign
here!'" said the former manager.
Bank of Greece rules allow banks to finance the
participation of employees in rights issues. Piraeus declined to comment on the
rights issue and the loans because of legal proceedings against Reuters.
In May, Piraeus announced it was suing Reuters over an
earlier report about the bank renting properties owned by companies run by
Sallas and his family. The bank is claiming 50 million euros in damages.
Reuters stands by the accuracy of its report.
"AN IMPORTANT LOSS"
According to stock exchange records, on September 17,
2007 Provopoulos bought 212,911 shares in Piraeus, having purchased the rights
to participate in the offer a week earlier. To cover the cost Provopoulos took
a loan from Piraeus for 5,024,812 euros, according to his own later
declarations.
He bought another 23,250 shares on December 28, 2007,
under a share option scheme.
After leaving Piraeus, Provopoulos held onto his
shares for three months while he was governor of the central bank overseeing
the banking system. He had informed legal advisers and been told that "the
ownership of the portfolio did not...influence in any way the legality of his
duties", his office later told parliament.
Provopoulos sold the shares in October 2008 after the
collapse of Lehmann Brothers sent bank shares plunging. He realized 2,449,256
euros - far less than his outstanding loan to Piraeus.
Speculation about Provopoulos' debt to his former
employer prompted Michael Karhimakis, then a Pasok MP, to ask questions in the
Greek parliament. Provopoulos responded with a formal statement from the
director of his office.
It said he had suffered an "important loss"
on his Piraeus shares and repaid his loan to the bank with the proceeds of the
share sale plus a personal cheque for 2.1 million euros. The statement to
parliament made no reference to the fact that Provopoulos had been granted a
severance payment of 3.4 million euros by Piraeus.
There was no legal obligation for Provopoulos to
declare his severance payment in parliament and the Bank of Greece said it was
not mentioned "due to the fact that the then-asking MP confined his
questions to the sale of the shares of Piraeus."
But Karhimakis, the former Pasok MP, told Reuters
that, in his opinion, Provopoulos had a moral duty to disclose the payment and
make clear his assets and their source. "This is a period when
transparency for public figures is needed more than ever," he said.
Provopoulos' salary as governor of the central bank is
not published. But the Bank of Greece told Reuters his salary is 50 per cent
lower than it was when he took office, after he had accepted two pay cuts
during the country's austerity drive. Provopoulos now receives an after-tax
'monthly' salary of 7,615 euros paid, as for many Greek public officials, 14
times a year, said the central bank.
In August, Provopoulos defended Piraeus's takeover of
ATE in the Greek parliament. When lawmakers questioned him about Reuters
reports involving Sallas, Provopoulos was dismissive. He said the reports
referred "to isolated incidents, implications that are presented as facts
and selected parts of statements by experts and non-experts to arrive at an
arbitrary conclusion in my opinion - that the Greek banking system is suffering
from bad corporate governance and inadequate regulation."
If this were true, Provopoulos said, "then today
there would no banks left standing."
(This story removes euro sign in third paragraph from
bottom)
(Reporting By Stephen Grey and Nikolas Leontopoulos;
Editing by Richard Woods and Simon Robinson)
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