Decision Important to Several Hundred Families Overshadowed by Antanas Bosas vs. DNB Case

17 April 2012,Vilnius PRESS RELEASE Yesterday’s announcement of the ruling in the case of Antanas Bosas, a well-known Lithuanian businessman and politician, versus DNB bank, overshadowed another piece of news reported at approximately the same time, with a mere difference of an hour. Unlike in the case of the civil dispute between a private individual and a bank, the ruling of the Supreme Administrative Court of Lithuania (SACL) has drawn the final line in the long litigation epic between DNB and the Lithuanian Securities Commission (LSC) that lasted since 2009. Presently the DNB opponent’s role is played by the Bank of Lithuania, which has assumed upon itself the functions the LSC. Private person M. S., a member of the association "For Honesty in Banking" from Klaipėda, acts in the capacity of a third party in the case. The substance of the case is similar, and much has already been written about DNB’s troubles associated with the distribution of stock indices and other asset-backed bonds: in 2011, the public institution having the supreme competence in the sphere of public securities has established that DNB committed a series of violations by distributing these complex financial products to non-professional clients and failing to comply with the Law on Markets in Financial Instruments. The LSC even sanctioned the bank with a fine of LTL (Lithuanian Litas) 15,000 (NOK 33,000). On Monday SACL issued a non-appealable judgement recognising that the part of the LSC decision concerning the sale of stock indices and other asset-backed bonds was lawful and the bank’s appeal against the decision was unjustified. The Court made a "concession" to Lithuania’s third biggest bank DNB by reducing the fine to LTL 5,000 (NOK 11,000). The judgement (that can no longer be appealed against by the bank) can save from bankruptcy not only the family of M. S., but also as many as nearly 640 other families. As it was recognised by the LSC during an extended investigation, the individuals had been lured with the same investment strategies as the above-mentioned Klaipėda resident. Does the breakthrough in the outcomes of litigations between investors and DNB represent a trend that demonstrates a different and possibly more humane approach to banking problems by judges? It is hard to tell and it is up to you to decide. According to our calculations, it is the 6th successive judgement that has caused concerns to the bank. In the middle of December the court supported the client R. B. rather than the bank in a similar dispute. The dispute amount was more than LTL 800 thousand (NOK 1.76 million). In mid-January the same court granted the hope of recovery to another person, S. L. (amount – LTL 537 thousand, or NOK 1.2 million). In the beginning of March Vilnius County Administrative Court rejected the bank’s complaint whereby it sought to challenge results of the extended investigation into the sales of stock indices and other asset-backed bonds by DNB. In the very beginning of April the media reported about the outcome of the case Gintautas Preidys, a former well-known banker, versus the bank: the court award was LTL 0.2 million (NOK 0.44 million) rather than LTL 1.4 million (NOK 3.1 million) claimed by the bank. Yesterday another client – former Lithuanian Parliament member Mr. Antanas Bosas – also succeeded in proving his point in the case of Antanas Bosas vs DNB. As far as we know, the bank has already appealed or intends to appeal against all of the judgements. The bank, however, will not be able to challenge the sixth successive unfavourable judgement because SACL ruling of 16 April 2012 is non-appealable. The bank’s persistence in courts is not surprising. The stakes are as high as LTL 100 million (NOK 220 million) that the bank would have to pay out to reimburse investors’ losses. From a different perspective, it is LTL 100 million that families of Lithuanian people will have to pay (or in some cases have already paid) out of their pockets to the bank as the price of their error (or was it the bank’s error?). Six successive favourable court judgements provide hope for those people that truth is on their side. DNB AB, the Lithuanian arm of Norway's biggest bank DNB, issued and sold more than LTL 700 million (approx. NOK 1.55 billion) stock indices and other asset-backed bonds funded by mortgage secured loans in the last 5 years to approx. 640 private individuals in Lithuania. Possible losses of those clients have reached LTL 100 million (NOK 220 million), Lithuanian Securities Commission estimates show.