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Letter from Athens: Greece’s Follie Follie Folly Shakes Stock Oversight Again

January 4, 2021

If you're thinking of taking the roller coaster ride known as investing in the Athens Stock Exchange you might want to check if the guys allegedly safeguarding it from fraud are named Ponziopoulos or Madoffopoulos because it looks like no one's home. 

It crashed in 1999, wiping out the life savings of small investors and it took only 18 years for an Athens Appellate Court Prosecutor to find 36 people guilty – after they'd been acquitted – among them stockbrokers, investors, and shipowners. 

Then-Finance Minister for the now defunct PASOK Anti-Socialists, Yiannis Papantoniou pushed Greeks to invest, predicting the market would rise like an eagle before it fell like a stone off a cliff. 

This is the guy who spent 17 months in pre-trial detention on money laundering charges then released – these types always seem to walk – and a judicial council in April 2020 said he couldn't be prosecuted until charges against him were further investigated, which will be done when Greece wins the World Cup. 

This being Greece, there's no word on what happened to the 36 people found culpable for the crash that in three dizzying years saw the stock market’s capitalization losing 136 billion euros ($166.21 billion) in value, or what shipowners call petty cash. 

In 2005, the Athens Council of Appeals Court Judges referred to court six members of the Public Portfolio Management Company (DEKA) for stock manipulation as part of the crash in which Kathimerini said “a handful of entrepreneurs and politicians, using insider information, ripped off at least 1.5 million investors, obtaining billions of euros spread in Switzerland and worldwide via offshore companies.” 

While that was going on, the Greek jewelry and accessory maker Follie Follie, run by founder Dimitris Koutsolioutsos and his son George, were just beginning a 17-year run of defrauding shareholders, according to an independent audit by Pricewaterhouse Coopers (PwC) said the newspaper and business paper Naftemporiki. 

While the report concentrated on the numbers and facts, there were, of course, political dimensions as well, showing that the Hellenic Capital Market Commission (HCMC) was not only asleep at the wheel but allegedly complicit, like finding out the U.S. Securities and Exchange Commission (SEC) was covering up a scandal. 

PwC's audit found that supervisory authorities and the stock exchange allowed a scam, including embezzlement, to go on from 2000-17, and then even after that while HCMC officials looked the other way despite massive evidence of wrongdoing. 

The audit, said Kathimerini, “also revealed the staggering and unprecedented negligence of supervisory authorities,” including not making a move after the scandal was busted open on May 3, 2018 by the American fund Quintessential Capital Management (QCM). 

The HCMC was under then-Chairman Charalampos Gotsis, whose job is to protect the stock market but who let the company keep selling shares for 21 days before suspending its trading and let the family rule the business. 

During the 16-month period until the start of the PwC investigation, data could have been destroyed, altered, falsified, or concealed, the paper said, but not enough to prevent disclosure of alleged crimes, including stealing money from the company. 

There were, the report added “substantially erroneous" results that misled investors and signs of massive embezzlement, implicating ex-ministers, members of the former ruling Radical Left SYRIZA government said to have provided cover. 

That meant that Folli Follie's numbers were faked, cooked, fudged, imaginary, and pulled out of thin air under the nose of the HCMC, and that the family ran it like a personal ATM, profiting off high share prices and tradings. 

Between 2001 and 2015, for instance, dividends and returned capital doled out to shareholders, based on what the newspaper called "cooked books" totaled 116 million euros, equivalent to $141.44 million. 

Dimitris Koutsolioutsos received 44 million euros ($53.65 million) on top of 130 million euros ($158.51 million) from selling off shares, the report said, while his son pocketed 3.8 million euros ($4.63 million) and another 2.2 million euros ($2.68 million). 

Both men have been relieved of positions within the company, which is now overseen by a court-appointed management, but there have been no prosecutions for what multiple media reports suggested is criminal activity. 

An email included in the report also said the owners and Gotsis then discussed how to hide the breach and give instructions to give the impression the Capital Market Commission was doing its job to deflect criticism. 

The indication was that Gotsis was backing a bankrupt company accused of mismanagement and defrauding shareholders that had been exposed and that the Koutsolioutsoses influenced favorable rulings from the commission for 18 months more. 

One email in particular between Folli Follie Security Director Nikolaos Sakkos, and the company’s then major shareholder, George Koutsolioutsos, includes a reference to the then-Premier Alexis Tsipras, stating, among other things, that “the instruction from above is to assist the [Folli Follie] Group. This is the position of Maximos Mansion [the PM’s office]. The prime minister was also informed.” 

The three SYRIZA ex-lawmakers named, Alekos Flambouraris, Alexis Charitsis, and Stavros Arachovitis were shocked to find out gambling was going on in the casino and filed a complaint with Supreme Court prosecutor Vasiliki Pliota, claiming insult. 

They targeted Sakkos and anyone else who may be found responsible for defamation but as far as the Follie Follie case goes we'll get back to you with an answer. In 20 years.

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