THE ACQUISITION OF 9.7% OF BANCA TRANSILVANIA BY BANK OF CYPRUS The investigation in Cyprus used as evidence in the case of Horia Ciorcilă

The report that investigates the manner in which Bank of Cyprus came to own 9.7% of the shares of Banca Transilvania (BT), conducted by American consulting firm Alvarez&Marsal (A&M), at the request of the Central Bank of Cyprus, has been submitted as evidence in the case in which Horia Ciorcilă, the president of the Board of Directors of BT, and other bankers are charged with market manipulation and money laundering.

The first hearing before the High Court of Cassation and Justice (ÎCCJ) took place yesterday in order to try the appeal filed by the prosecutors in this case. So far, the defendants have been acquitted by the Court as well as by the Courts of Appeal.

The lawyer of Horia Ciorcilă and of the other defendants have requested a new trial date, due to the fact that the short delay that the report had been submitted in had prevented them from reviewing it properly. The prosecutors of the Department to Counter International Organized Crime and Terrorism (DIICOT) proposed for the request to be accepted, and the judges set a new hearing next month.

Horia Ciorcilă was sued in July 2010, by DIICOT Cluj for manipulating the stock market, because he had inside information about the intention of Bank of Cyprus to acquire a significant stake in Banca Transilvania, and he subsequently sold a large number of shares, through a company registered in Cyprus, which he controlled.

Also sued were Claudiu Silaghi, founder and former vice-president of the Board of Directors of BT, Christoforou Georgios (General Manager of Bank of Cyprus România) and Isaakidis Anastasios (former Credit Risk Manager of the Cypriot Bank).

In April 2013, BURSA wrote about the fact that Cypriot authorities are investigating the circumstances in which Bank of Cyprus (BoC) has come to control 9.7% of Banca Transilvania.

The document, dated March 26th, 2013, and requested by the Central Bank of Cyprus on August 21st, 2012, was saying that the evidence presented in the Romanian courts at the time, are inconsistent with the ones found by the investigator.

At the end of September last year, the deputy general prosecutor of Cypurs, Ricos Erotocritou, stated before a commission of the Chamber of Deputies in Nicosia that the investigation concerning the acquisition of the block of shares in BT by BoC had come to a "critical stage". The Cypriot official also said that the authorities in Romania have asked for the aid of their Cypriot peers, and a delegation from Romania was going to arrive to Cyprus that week, to receive aid with their own investigation in the case.

According to the report of A&M, Georgios Christoforou said that the relationship of BoC with Banca Transilvania began in 2006, when the Cypriot bank opened its branch in Romania. "The bank had commercial relations with one of the founders of Banca Transilvania, Horia Ciorcilă, starting in January 2007, through the loans granted to the Cypriot companies owned by Ciorcilă", the report states.

In the second half of 2008, Banca Transilvania needed additional funds and sought a capital injection from a strategic investor, says A&M, which added that BT has hired Merrill Lynch to find potential investors. Six were found, including Bank of Cyprus, and the "due-dilligence" process took place in April 2009.

According to the report of A&M, on April 23rd, 2009, Georgios Christoforou a was informed by Andreas Eliades, CEO of the entire Bank of Cyprus, that he signed together with Lefkios Joannides, Managing Director at Joannides & Co. and Yiannis Kypri, Group Chief General Manager, a confidential agreement with the officials of BT, by which BoC would get access to the information of the database made available to the potential investors in BT. Within Bank of Cyprus, this opportunity was called Operation "Beatrice".

The only non-binding offer for BT was filed by Marfin Investment Group, but it was not approved by the National Bank of Romania (NBR).

Even though officially BoC had dropped its plan to invest in BT, in August 2009, BoC was still considering acquiring up to 20% of BT, according to electronic correspondence, reviewed by Alvarez: "A document called < Draft Non-Paper on a possible Structure and Consideration for the acquisition of 20% strategic interest in Beatrice and subsequent Call Options > which circulated back and forth between the Mergers and Acquisitions department of BoC and outside consultants, on June 29th, 2009, revealed a mechanism by which BoC could get up to 20% of the shares of BT, in cooperation with one or more founding members, and the < relevant investor > (ed. note: Alvarez thinks that means the EBRD)".

On December 16th, 2009, BoC announced that it had acquired 9.7% of BT, for 58 million Euros.

"The Cypriot investment was done through a series of structures which concealed the true identity of the shareholder, which had as a possible consequence the minimization of the impact on the price of shares, because the market was not informed about the interest of BoC to acquire a significant percentage of Banca Transilvania", the A&M report states.

The document also states that an employee of BoC was granted a loan to act as a proxy in the acquisition of shares from the market in the name of BoC.