7,000 Fortis shareholders to sue bank

14th October 2008, Comments 0 comments

About 7,000 shareholders say they have been cheated by a government bailout which leaves them holding toxic assets.

14 October 2008

BRUSSELS -- About 7,000 shareholders of troubled bank Fortis NV indicated Monday they will take legal action against the company's management, claiming they were cheated by a government bailout plan that carved up the company and left them holding toxic assets.

The Euroshareholders association says it will sue the bank's bosses under Dutch law for dismantling the company without asking shareholder permission. That could derail government plans to rescue the bank which sought state help after it failed to get enough credit on frozen markets.

Belgium, the Netherlands and Luxembourg agreed in the last two weeks to split the bank, with the Dutch government taking control of its Dutch operations and Belgium and Luxembourg selling most of the bank's activities to France's BNP Paribas, the largest euro-zone bank by assets.

Fortis shares - which had been suspended for eight days and resumed trading on Tuesday - have dropped some 90 percent since the start of the year.

Shares in Fortis - previously the biggest bank in the Netherlands and Belgium - were more popular than any other stock for many small Belgian investors because they were seen as a solid investment.

Euroshareholders' Peter Paul de Vries said Fortis management destroyed EUR 30 billion of the bank's value and consistently misinformed to shareholders.

"In Dutch we call that lying because they really said until the end that the bank was solid, that there were no problems in terms of financial situation in the short-term, and within 48 hours they need a huge rescue plan," he said.

Fortis shareholders now own what de Vries called a "tiny" international insurance business - worth EUR 1.5 billion and earning EUR 200 million a year, and a stake in a structured product vehicle containing "toxic assets that at the moment in this credit crisis nobody wants".

They have no direct stake in Fortis' lucrative banking activities.

De Vries dismissed a Belgian government plan announced Friday to placate angry shareholders by giving them a future share in BNP Paribas profits.

Under the deal with the French bank, Belgium became its largest shareholder with an 11.7 percent stake. The government says it will use any profits from this to create a fund for Fortis shareholders to draw from after July 2014 - but only for the first 5,000 shares and for those owned on July 1 this year.

De Vries said it was unfair to compensate some shareholders while refusing to help larger investors, pension funds or anyone who bought shares more recently.

[AP / Expatica]

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