This must be the most interesting news story coming out of Scandinavia this week: The Norwegian bank, DnB NOR, who’s been found guilty of selling toxic saving products to private investors, not revealing the real risk involved, is facing the court again after appealing the first ruling. In its defense, the bank now claim they are the victim of a witch-hunt, and that the allegations are a result of a conspiracy against the bank.
“The majority of facts is conspiratorial in disfavor of the Bank.”
Anders Ryssdal
Claiming Conspiracy:: Anders Ryssdal (Wiersholm, law firm), Nils Gunnar Brattlie (DnB NOR Markets), lawyer Catherine Sandvig and lawyer Trond Bjerkan. (Photo: DN.no).
I guess it could be seen as a sign of desperation when DnB NOR’s lawyer writes in the appeal paper that the ruling by Oslo District Court in June last year is “conspiratorial in disfavor of the Bank,” and that the choice of words in the verdict shows that the court has decided to “get” the Bank. But it could also be a part of a sneaky strategy to derail the whole case.
Well, if I was a lawyer defending DnB NOR, I think I would have chosen a completely different – less ridiculous - strategy.
But perhaps Norway’s main bank is running out of arguments.
However, as you all know, conspiracy theories are always impossible to prove – or reject.
And that’s probably what DnB NOR is aiming for; making it impossible for the Borgating Court of Appeal to reach another verdict in disfavor of the Bank.
It is the Norwegian business website, DN.no, who have gotten hold of the appeal papers.
According to the website, DnB NOR’s lawyer Anders Ryssdal at the law firm Wiersholm, writes:
“In general, is the majority of the court’s valuation of the evidence conspiratorial in disfavor of the Bank.”
The bank’s lawyer also argues that the Oslo District Court have chosen to disregard more confident calculation made by other experts, including DnB NOR’s own.
According to the appeal papers, DnB NOR argues that the majority of judges at the Oslo District Court have revealed through their wording that they more or less had decided to “get” bank before they made the ruling.
The court use words and expressions of an “odious character,” the bank-lawyer writes, in order to create an impression of the DnB NOR’s products as “suspect.”
“Odious” means disgusting or cruel.
As an example of the conspiratorial, odious wording, DnB NOR points to the District Court’s conclusion that says the Bank’s sale of these saving funds is to be considered as marketing of “suspicious products,” according to a “carefully thought out plan.”
11 Years of Outhauling
This case started in 2000, 11 years ago, when private investor Ivar Petter Røeggen placed all his savings in two of DnB NOR’s so-called structured funds, that according to the Bank was guaranteed a pay-off.
But five years later Mr. Røeggen had lost NOK 230.000 of his original investment of NOK 500.000.
And in 2006 – encouraged by the money magazine “DINE PENGER” – he files a complaint to the Norwegian Consumer Council claiming the Bank had made false promises, and withheld information about the real risk involved.
According to the calculations by the independent experts, there was a 60% chance of loosing money by investing in DnB NOR’s guaranteed structured funds.
The Norwegian saver requires that DnB NOR cover his losses.
Now, the snowball starts rolling:
In December 2007 the Consumer Council says in a hearing, held by the Norwegian Financial Authority that it should be prohibited to sell these structured products to non-professional investors.
This becomes the conclusion of hearing, and the recommendation later sent to the Norwegian finance ministry, in January 2008.
The finance ministry comply with the request and makes it into law, March 1. 2008.
In January 2009 the national Finance Board of Appeals agrees with Mr. Røeggen, but just a couple of hours after the announcement by the Board of Appeals, DnB NOR makes it clear that they will not comply with the decision.
In April 2009 the case opens at the Oslo District Court, who in June the same year comes to the same conclusion as the Consumer Council, the Financial Authority and the Finance Board of Appeals.
However, DnB NOR still refuse to accept this view, and appeals the verdict to a higher legal body – the Borgating Court of Appeal.
And here we are…
Of Fundamental Principle Importance
According to Norwegian mass media there are about 2.000 other private investors who have lost money by placing their savings in the same “guaranteed” funds as Ivar Petter Røeggen.
They are eagerly waiting for a final verdict – if Norway’s partly state-owned bank is forced to cover the losses of all these people, it could result in a double-digit billion loss for DnB NOR.
At least, that’s what the Norwegian media, authorities and politicians think.
The fact is; it could be a helluva lot more…
For some reason, they seem to forget that DnB NOR now is the sole owner of the Baltic bank DnB NORD.
Up until January 2011, the Norwegian bank owned the Baltic bank in a 50/50 relationship with the German bank NORD LB - one of Europe’s leading developers and suppliers of structured financial products.
Due to the shady cross-border activity over the last decade, no one knows excactly how many dissatisfied customers that might turn up if DnB NOR loses this case.
But it will definitively be more than 2.000…
International Focus
The law suit against DnB NOR is also being followed closely by the international banking community.
The consequences can be far more widespread than most people think.
In the meantime, global banks are scaling down on their dodgy dealing as fast as possible.
It has been reported that there was a 32% increase in promotions withdrawn in 2010, compared to 2009.
The increase is reported to have continued in the first quarter of 2011, with 66 withdrawals compared to 50 in the same period in 2010.
It is said that the crackdown is ahead of new powers being given to its successor, the Financial Conduct Authority.
The Financial Times has described one of the withdrawn adverts for an investment fund as claiming a 30 per cent headline growth rate but with risk warnings buried in the small print.
Jonathan Davies, partner at RPC, says:
“There is a very competitive market for many financial products. This puts pressure on firms to make their offering stand out and it is very easy to fall foul of the rules. With the FSA clamping down and with new powers for its successor on the way, it is more important than ever for businesses to make sure their adverts are watertight.”
So, if DnB NOR gets another conviction in the Appeal Court over the next weeks, it may blow a big hole in the ballon for financial institutions all over the world.
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