Pilatus Bank’s directors are suing the financial services watchdog for damages in the hope of regaining control of their now-defunct business, The Sunday Times of Malta has learnt. 

The beleaguered bank has been at the centre of political controversy ever since a series of leaked financial intelligence reports flagged evidence of  money-laundering and serious compliance shortcomings in 2016.

It has also been alleged that the bank was used as a conduit for Azerbaijani millions making their way into Europe, while it was linked to shocking allegations that Prime Minister Joseph Muscat’s wife Michelle secretly received graft payments, a claim since dismissed by an inquiry.

The Malta Financial Services Authority issued a number of sanctions against Pilatus back in March after its chairman Ali Sadr Hasheminajad was arrested in the US for alleged money laundering. The MFSA then effectively seized all the bank’s operations pending an investigation.

Abusive and illegal

In a court application, seen by The Sunday Times of Malta, the bank’s remaining directors have claimed that the authority acted in a “negligent, abusive and illegal” manner when it stopped it from being able to operate before its chairman had been found guilty of any crime.

The directors are insisting that the authority acted in bad faith, violated their constitutional rights, and acted beyond its powers when it moved to effectively close Pilatus down.

They are also accusing the authorities of buckling under pressure to take severe action against them.

“The administrative measures taken against the bank were motivated by preconceived prejudices that the MFSA held against the bank,” the court documents read.

The directors are also taking umbrage at the way the authority appointed US financial regulator Lawrence Connell as a competent person to over see the bank.

The court documents claim that Mr Connell was charging a $50,000 monthly fee, despite the inoperative status of the bank.

His two assistants, the directors claim, were also charging the bank €800 for every day of work at a bank which had stopped operating.

And over and above this, the directors say their were being faced with expense bills of around €15,000 every month.

These include, among other things, five-star hotel bills, wining and dining costs, gratuity payments, laundry bills and the cost of a number of items that went missing from one of the assistants’ hotel rooms, the directors claim.

All told, the competent person and his staff were costing the bank around €100,000 every month, the directors say, adding that this did not include the hefty loss of earnings the bank had suffered since being closed down several months ago. 

Meanwhile, a group of Pilatus Bank depositors have threatened to also sue the financial services watchdog in a bid to reclaim about €80 million in frozen assets.

And the directors are still moving ahead with their first bid to regain control of their bank through the financial services tribunal.

In the court documents, the directors insist that while this avenue was still being explored, the tribunal was limited to only being able to overturn or review the MFSA’s sanctions.

This was why they had turned to the courts, in a bid to seek damages and to get their hands back on the Ta’ Xbiex bank that has been embroiled in controversy for some three years.  

ivan.martin@timesofmalta.com

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