Journal International Herald Tribune du 13 juin 2007

JP Morgan says banker misled it in Greek bond sale

By Maria Petrakis and Gavin Finch
Bloomberg News

Wednesday, June 13, 2007

ATHENS: JP Morgan Chase told a Greek parliamentary inquiry Tuesday that it had been misled by one of its bankers over the sale of €280 million in government bonds bought by pension funds at inflated prices.

Mike Savvides, a JP Morgan banker, was part of the "core deal team" responsible for underwriting the Greek 12-year bonds that were worth the equivalent of $374 million. He has been dismissed because of a "failure to promptly share his knowledge of aspects" of the bond sale, Jakob Stott, the chief operating officer for Europe, Middle East and Africa at JPMorgan, told the Greek Parliament's standing committee on economic affairs in Athens.

Savvides was unavailable for comment.

Lawmakers summoned JP Morgan, one of three largest U.S. banks, and the British hedge fund North Asset Management to explain why four state-run pension funds had been sold bonds for 100 percent of face value hours after JPMorgan sold the debt to North Asset at 92.95 percent.

The bond sale cost the labor minister, Savvas Tsitouridis, his job and prompted Prime Minister Kostas Karamanlis to overhaul the management of about 200 state-run pension funds.

"This sale was approved internally on the basis that North was a buy and hold investor," said Stott.

"We have subsequently discovered that a member of the core deal team at JP Morgan knew that North intended to on-sell."

Opposition politicians and trade unions accused JP Morgan, based in New York, North Asset of London and Athens-based brokerage Acropolis Axepey of taking advantage of the pension funds in the Feb. 22 sale.

"The pension funds should look at themselves, their advisers and the institutions they dealt with," Stott said.

JP Morgan said in a statement in April that it had sold the securities to North Asset.

Acropolis bought the bonds for 99.95 percent that day after the securities traded, and sold them to pension funds at face value, according to a statement by Acropolis.

The biggest unions in Greece have called on regulators in Britain and the United States to investigate JP Morgan and North Asset.

The 12-year bonds pay annual interest at 6.25 percent for the first two years and then a return based on the difference between short- and long-term rates.

Subsidiary Pension Fund of Public Sector Employees, Subsidiary Fund of Social Security Funds Employees, Subsidiary Pension Fund of Pharmaceutical Employees and Pension Fund of Newspaper Vendors bought the debt.

JP Morgan and North Asset offered to buy back the bonds at 100 percent of face value last month. Talks broke down after the funds asked to be compensated for gains they would have made had they bought regular bonds sold by the Bank of Greece instead.

The Greek government said on June 8 that it would "cover the difference" between the two sides and the pension funds accepted.

Greece has sold at least €1.68 billion of bonds like the ones issued in February, helped by underwriters including JP Morgan, Paris-based BNP Paribas, Deutsche Bank in Frankfurt, HSBC in London, EFG Eurobank Ergasias and NBG. EFG and NBG are based in Athens.

Louis Plowden-Wardlaw, a managing director of North Asset, was also scheduled to appear before the parliamentary committee.

"We expect to get full explanations to the plethora of questions," Vasso Papandreou, a socialist Pasok party member who sits on the committee, said in an interview Monday. "We want full light to be shone on structured bonds issued by the Greek state."

The hearing is the second attempt by lawmakers to get the two companies to answer questions about the sale.

JP Morgan asked for more time to prepare when initially invited to appear on May 22.

"We volunteered to speak in Parliament because we want to get the facts out and will endeavor to answer any question asked of us," said Michael Golden, a spokesman in London for JP Morgan, before the hearing started.

The government has banned pension funds from buying similar structured bonds or derivatives and ordered an audit into all investments over the past decade.

The National Anti-Money Laundering Authority and an Athens public prosecutor are also investigating.

"North is pleased to have the opportunity to speak in Parliament," said Angus Urquhart, a spokesman for North Asset Management in London. "It had volunteered to do so in order that the facts in this matter can be made clear."

Gavin Finch reported from London.

 

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