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
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
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
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.