TBILISI, Georgia--(BUSINESS WIRE)--In a statement released today, Salford Capital said:
On 24 November 2007, the National Bank of Georgia (“Regulator”) seized Standard Bank (“Standard Bank” or “the Bank”). Prior to the seizure Standard Bank was one of the most reputable and fastest growing banks in Georgia.
The seizure was part of a series of attacks and confiscation of assets believed to be related to Badri Patarkatsishvili; a prominent Georgian businessman and opposition party candidate.
At the time of the seizure, the bank was in full compliance with all Georgian banking requirements; particularly those related to liquidity.
The following events and circumstances raise some very serious questions regarding the conduct of the Georgian Government and Bank of Georgia:
After the imposition of a state of emergency on 7th November, under direct pressure by government officials on key clients, a large number of the deposits (nearly 25% of total deposits) were withdrawn from Standard Bank in any attempt to create a artificial liquidity crisis
Salford asks: “Apart from political objectives, what other personal or commercial interests were there?”
The rationale given for the seizure was unsubstantiated liquidity concerns.
Salford asks: “If indeed there were liquidity concerns, why prior to the seizure was there no engagement by the Regulator with Bank management or shareholders to discuss and remedy them?”
Salford asks: “Why has no written explanation been given to shareholders by the Regulator specifying the liquidity concerns”
Salford asks: “Why has the Regulator refused to respond to written documentation from shareholders demonstrating that, at the time of the seizure, the Bank was in full compliance with all liquidity requirements?”
Police from the Georgian Constitutional Security Department (“CSD”) were present during the seizure.
Salford asks: “How do liquidity concerns at a Georgian bank represent a threat to Georgian national security?”
In contradiction of Georgian banking law, prior to the seizure, Bank employees were forced by the Financial Monitoring Service of the Regulator (“FMS”) and CSD to provide identities and details of account holders.
Salford asks: “What was the basis for this illegal request, and was the information used to pressure clients to withdraw accounts?”
During the seizure, specific references were made by the Regulator as to the political nature of the seizure and links between Standard Bank and Mr. Patarkatsishvili.
Salford asks: “If the grounds for seizure were liquidity, why were the specific references to Mr. Patarkatsishvili?”
In a meeting on 26 November, the Prime Minister categorically refused a good faith shareholder request to conduct an emergency working session with the Regulator to resolve any liquidity issues, and he highly commended the Regulator for its actions.
Salford asks: “Why would such a request be denied if the only reason for the seizure was liquidity?”
Salford asks: “How could someone with the Prime Minister’s distinguished international banking experience highly commend such actions?”
A letter of 30 November from the Regulator states that Bank assets will be sold if additional capital is not quickly infused into the Bank. The letter is silent about the amount to be infused, the financial situation of the Bank, or management rights of shareholders.
Salford asks: “How can shareholders be asked to commit capital without basic financial information and management control?”
Salford asks: “Is this letter just an excuse to justify a liquidation of the Bank’s assets?”
Since 7 November, Bank of Georgia has received a very high level of Standard Bank deposits. More recently on 30 November, 2007 a very large deposit of $27.8m due to Standard Bank was diverted to Bank of Georgia.
Salford asks: “Why has such a high level of Standard Bank deposits been diverted to Bank of Georgia?”
Until his nomination as Prime Minister, on 16 November 2007, Lado Gurgeniedze served as Chairman of the Supervisory Board of Bank of Georgia.
Salford asks: “Does the Prime Minister retain any shareholding or beneficial interest in Bank of Georgia or any of its subsidiaries?”
Salford asks: “What role has Bank of Georgia played in this affair?”
Salford asks: “Were there any concerted actions between the Georgian Government and Bank of Georgia?”
The current Finance Minister, Mr. Nika Gilauri, is the brother of the CEO of Bank of Georgia. Mr. Nika Gilauri was present at a meeting between Standard Bank’s shareholders, the Prime Minister and the Regulator on 26 November where sensitive issues related to Standard Bank were discussed.
Salford asks: “Why was a person subject to such a conflict present at this meeting?”
Eugene Jaffe, CEO of Salford Capital Partners, stated:
“This is an outrage – an artificial liquidity crisis engineered by the Georgian Government in order to seize a leading Georgian Bank for political motives; to the benefit of Bank of Georgia. All under the knowledge of the Prime Minister who knows better.
I have not seen an abuse of power like this since Russia in the mid 1990’s. This is a complete disregard for the rule of law and investor rights in Georgia – a truly appalling precedent has been set. We will take all means necessary to defend our interests”.
Salford has engaged the international law firm of Debevoise & Plimpton LLP to represent it in this matter and has put the Georgian Government and Bank of Georgia on formal legal notice regarding this matter.
For more information on Salford www.salfordcapital.com