Bond scandal charges

A bond scandal that has rocked Greece for months is hurting the government’s popularity ahead of elections, but the scope of the damage will hinge on whether a public prosecutor charges senior politicians. More than 60 people face criminal charges for their role in the sale of government bonds to pension funds at inflated prices, but no one has yet been named, while snap polls loom, possibly as early as this autumn. «If the prosecutor names ministers or senior officials, the ruling party will suffer at polls, otherwise the scandal is not likely to shrink the gap (between the two main parties) further,» said Tassos Georgiadis, general manager at pollster Kappa Research. According to Kappa, corruption and financial scandals dominating headlines in recent months are turning voters away from the ruling conservative New Democracy party. In a July poll, New Democracy has a one-percentage-point lead over the main Socialist opposition, its narrowest since coming to power in 2004 and within the margin of error. At the heart of the scandal is a -280 million, 12-year structured government bond, with an initial 6.25 percent coupon, issued in February this year and underwritten by JPMorgan. It passed through the hands of several brokers before ending up with state pension funds. The instrument, with a variable coupon after the first two years based on the difference between the 10-and two-year swap rate, was issued below par but ended up with pension funds at face value – meaning the pension funds paid over the odds. Intermediaries who bought the bonds before they were finally placed with Greek pension funds included London-based North Asset Management, HVB Bank in Athens and the Acropolis brokerage, whose license has been revoked. Naming names Government officials say most of the damage from the affair – which has already led to the sacking of a labor minister – has already been done. «The worst is over,» said Deputy Finance Minister Petros Doukas, in charge of the Treasury which gave the go-ahead for the bond issue. «This was a localized event between funds and brokers.» The public prosecutor probing the case may have a different opinion. Media have speculated that brokers and fund board members will be named, but all eyes are on whether any senior government officials will be charged. Last month, chief appellate court prosecutor Giorgos Koliokostas laid nine types of felony charges, including fraud, breach of trust, money laundering, tax evasion, aiding and abetting and embezzlement. But names were not disclosed. The charges came after prosecutors probed the role of financial intermediaries and fund officials in the affair. The investigations of bond transactions stretched back to 1999. Court officials have not specified how many were in connection with the bond at the center of the affair. «The investigating magistrates are studying the voluminous brief and will start to call in witnesses. They will not take holidays,» said a court official who did not want to be named. (Reuters)

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