Archives for June, 2014

Landsbanki Misleading Advertising Case Due to be Filed

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Lawyers acting for Landsbanki victims are due to file a misleading publicity case against Landsbanki Luxembourg S.A., Lex Life and Pensions S.A. and Offshore Money Managers Correduría de Seguros S.L.

The case is based on the extensive fraudulent publicity that all three entities issued when offering the product known as ‘SITRA’ (Spanish Inheritance Tax Reduction Scheme), ‘Capital Insurance’ or ‘Equity Release‘.

According to the documentation that lawyers hold, the following has been established:

  • The product was devised as a means to reduce, or eliminate completetely, Spanish IHT. We now know this is not only untrue, as it proposes customers to defraud the Spanish Tax Office.
  • The product was also designed to potentially produce an income, it being the difference between the return on the invested asset, minus charges and expenses, and the cost of servicing the loan. This was just one possibility, the other more likely one being total loss.
  • The advertising stresses prominently the benefits of the product but omits the risks involved -or if at all features these in small print- namely the loss of the property and further. 

Landsbanki was extremely successful in attracting new customers by using its main feature: reduction of Spanish Inheritance Tax. Lex Life & Pensions did too.

And Lex Life & Pensions used the name top Spanish firm Cuatrecasas to push sales, by admitting the following:

this product has been ellaborated in conjunction with top law firm Cuatrecasas

Lawyers are awaiting a formal response to a letter sent to Cuatrecasas but we can anticipate the response: “we deny any involvement and do not want to know anything about this product”

The case is to be filed with Courts in Malaga and will focus on the defendants’ advertising.

As for the role of OMM, its responsibility is two-fold:

  • Active participation in the promotion and marketing of the product, generously remunerated with an introduction commission and further, by receiving regular trail commissions (as is the case with Jyske bank too).
  • Attribution of joint responsibility to any media outlet used to promote and market a particular product or service (rulings by Madrid Appeal Court rulings 17/6/2008 and 30/9/2009).

A case for misleading publicity narrows down the scope of the dispute as it confines the Judge to rule on whether the advertising is/isn’t misleading, without giving any room for further interpretation (i.e. namely misselling: whether customers could and should have sought further advice, whether they were savvy investors or suitable for the product, whether it was a high risk speculative product known to the public etc.).

OMM has declined to come forward to assist claimants, ignoring letters from lawyers inviting them to participate in this case as witnesses, and yet their fraudulent advertising is still today available to the public.

Conversation between DANSKE BANK INTERNATIONAL and Son of a Victim

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Søren Glente

This conversation was taped by the son of a Danske Bank International S.A. victim, and Soren Glente, at the time one of the bosses in charge of selling the Capital Assurance. The conversation had already been postedin this site but now, we have the most relevant parts in writing.

In the recording Mr. Glente, a classic Luxembourg-based Danish banker, has a rare fit of honesty and sings like a canary: 

 

Minute 15:00 onwards

S.B.: How would you describe the risks of this product?

Soren Glente: Well ehhh depending on how aggressive the client would like to be then, I mean if you did it only for the purpose of optimize your tax situation. Then the risk is quite small, it will cost you something each year, I mean the difference between what you paid and the interests of the loan and what you could achieve on interests of the       and if these were place cautionally  the income from the assets would be less than what you paid on the loan, and that would be the price of …

S.B.: and was that made clear to the client?

Soren Glente: oh yes sure, for the

S.B.: so the income from the loans, sorry the income from the assets and investment would never cover the loan? Ehh?

Soren Glente: no , if you wanted to have a very cautious investment profile, then you couldn’t you couldn’t have , the income couldn’t achieve the cost of the loan, no. if you wanted to to achieve that on the loan , then you had to be take some kind of risk, like buying more risky assets

S.B.: so it was really ehh

Soren Glente: and so on and so on

S.B.: so in order to be low risk it was loss making

Soren Glente: yes, that’s for sure

S.B.: and loss it was going to accumulate every year

Soren Glente: yes, not by much, but yes, it would, it would accumulate each year because you would be ehh, you would be able to get an income from, let’s say your deposit or your short term bonds which would be ehh, the income would be less than what you paying interests on the loan, so therefore it would accumulate each year, yes it would

S.B.: do you think my clients understood that?

Soren Glente: yes they did, because I explained that to them, when I had meetings with them, I explained them , because I was, when I spoke  with clients ehh or with your parents ehh, they were, in the beginning the investments was very conservative  placed by me in an agreement with them, and then each year they could see that the capital actually degrees value, that the assets couldn’t provide income which would pay the interests of the loan, so therefore they came to me actually and ask whether I, we should consider changing the assets to more risky assets, in order to achieve a higher income, so I had a long dialog with your clients, ohh with your parents  about that, because I had to tell them that if they wanted that, the risk would increase and as far as  I remember we agreed to take a small portions of your parents’ assets and place them in a slightly risky assets, in order to at least break even, that is as far as I remember, but you could see, but you should be able to see that on the notes or… so that’s what happened. So  I remember I had a dialog with your clients, with your parents  in the bank sometime

S.B.: mmm mmm

Soren Glente: but we are going many years back now

S.B.: right, well I think that they did not understand it, I don’t think that they understood that from the beginning when they signed up to this contract, that this was going to run it to loss, if it was going to be lowerer QQ  

Soren Glente: no, you might be right. That they didn’t because, you might be right that they didn’t understand that

S.B.: mmm there were…

Soren Glente:  many many clients on the costa del sol didn’t understand that you can’t just, you can’t you can’t just automatically make money out of the negative equity, which it actually was, without taking risks and that has been the case for many many unfortunate clients down there that they are they have placed assets on too risky assets too risky assets like equities and things that were having a loan on both the house and the assets

S.B.: did you know the others, do you know,   how many other clients did you have like my parents?

Soren Glente: several

Up to minute 20:00

 

Minute 32:50 onwards

S.B.: and do you still sell this Company insurance scheme product?

Soren Glente: yes, by all means if people they are wanting to tax optimize their situation then that is one of the best schemes you can sell in.it really is

S.B.: but there is dispute about whether it does actually protect against Spanish inheritance tax, not everyone says, not everyone says it protects

Soren Glente: yes, but I have got a legal opinion saying differently

S.B.: from who, may I ask who from?

Soren Glente: it was from several other companies Price Waterhouse Coopers in Spain in Madrid, we have a legal opinion from these guys

Minute 34:03

Soren Glente: Yo have to do it right to have it to work, but it does work, you just have to know that the reason for doing this is not to release your equity from the property to in order to buy a new car or whatever you want to, the reason for doing this is to optimize your situation for wealth tax and yeah mainly inheritance tax, wealth tax was also an issue, but it is a lesser issue today

Rothschild Case: Málaga Court Formally Orders Service of Process

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The Malaga Mercantile Court 1 Bis, with date of the 7th of May (received by actign lawyers on the 5th June) has formally accepted the claim, its jurisdiction on the matter and service of process on the Spanish addresses provided for N.M. Rothschild & Sons.

Defendant Rothschild could do one of the following now:

  • Accept service of process, appoint lawyers and defend the claim.
  • Attempt to refuse service of process in any of their 2 addresses in Spain (Madrid and Barcelona), demanding the Court to service in their Guernsey offices.
The Courts can then do one of the following:
  • Where service of papers is accepted, the 20 days period will start counting.
  • If they refuse and request that the Particular of the claim are notified in Guernsey, the Court may reject their allegations (most probably) and note their refusal to accept and acknowledge service, continuing the case by default. Alaternatively, the may accept the defendant’s allegations and decide to serve in Guernsey (unlikely).
It is possible that Rothschild will do anything in their hand to delay, obstruct, confuse, protract and hinder the efforts of their victims in exposing their Credit Select Series 4 mortgage loan deceiptful advertising, all the while arguing that, whatever was published on the tax benefits of their product it was “for guidance only”, and not be “relied upon”.
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