National Bank Saga • January 04 2004

The National Bank Scandal - Part 5

“Your shares are worth nothing”

"A case of either us or Mr Mintoff"
In the single day following the announcement on television by then premier Dom Mintoff that the government would be taking over the National Bank of Malta, army soldiers and policemen were being sent round to shareholders’ houses to collect signatures for the share transfers. Soldiers arrived as early as 2am and 3am to collect the signatures from the shareholders. The shareholders were scared: they had been warned by the National Bank directors that Mintoff intended to remove their limited liability and that he would make them personally liable for any deficit the bank would have incurred in the run.
On the morning of Wednesday, December 12, 1973, Adrian Busietta and Philip Attard Montalto had already signed off the shares they held in the National Bank through B. Tagliaferro & Sons. Busietta and Attard Montalto had signed off 2,328 ordinary shares to Mintoff, worth at the time approximately Lm575,000: "We did so under great pressure and following threats to us and our families," Busietta wrote in his November 11, 1995 affidavit.
By that evening, Mintoff had already announced that the government had obtained over 5,900 shares and that it needed 6,534 shares in order to have the two-thirds necessary to complete the takeover. In Parliament, it seemed that Mintoff’s tenacity to obtain the signatures of the shareholders was not arousing the Nationalists a little bit – everything seemed to have been flowing as usual.
Earlier that afternoon however, Busietta and Attard Montalto had been summoned to Court, along with Baron Patrick Scicluna and Alfred Delia. Mintoff urgently needed a large number of shares to complete the two-thirds of shares he needed. These included the 1,109 shares pertaining to the late Count Alfred Antonio Sant Fournier and the Marquis John Scicluna.
The former were administered by directors Adrian Busietta and Philip Attard Montalto. They were the co-curators for the 191 ordinary voting shares registered in the name of the Count and his four children: Marie, wife of Attard Montalto, and Eileen, wife of Busietta, and their brothers Alfred and Anthony Sant Fournier.
The other shares belonging to the late Marquis John Scicluna, 918 in total, were administered by his son Baron Patrick Scicluna and Alfred Delia. Mintoff was getting impatient – he wanted to notch up the two-thirds of shares (9,800 in total) as soon as possible: "The number that is needed is 6,534… they are looking for those who have a lot, not those who have just one otherwise they’ll take long… fancy looking for all of them! They are looking for the big ones to say: ‘We have so much.’ Now there are two applications in Court for 1,109. And we think the decree will not take long."
In Court, Busietta refrained from giving evidence so as not to commit himself on these shares. Those who gave evidence for the Sant Fournier shares, curators and administrators, insisted that if there was any case of "zero value" this could only be temporary, in the circumstances of the case:
"It was enough to recall what we had been thinking, namely what could be awaiting us when we went out of the courthouse, when we returned home….after all those insults in public, that we the shareholders had now ‘had our fill’… and that Mr Mintoff was not going to be responsible for whatever the people might do if we continued to cause them ‘greater losses’," Busietta writes in his affidavit. "This was a case of either us or the state of Mr Mintoff."

In the courtroom
"We appeared before an almost empty courtroom," Busietta writes in his affidavit. "The application requested the court to decide on whether the shares of Marquis Scicluna and Count Sant Fournier could be transferred for free in accordance with Government’s requirement."
Attorney General Edgar Mizzi was going in and out of the Second Hall of the Civil Court, and informed the judge that the Prime Minister wanted a decision quickly so that this affair could be closed. "I remember very clearly Judge Xuereb’s words to Dr Mizzi - Edgar, I cannot visualise ‘zero value’ in a share because if it has no value, why is he selling it? In that case he keeps it. Everything has some value, even if only for the design on the share certificate’."
Although the judge told Mizzi he refused to be hurried and pushed "here and there on such a delicate matter," it seemed apparent that Attorney General was placing more pressure on the situation. As witness, Mizzi assured the judge that at that stage the shares had no value because the licence was suspended and because the government would be taking over the bank. Above all, it would be in the interest of those shareholders who themselves had deposits with the bank and that the government should save the bank.
Present in the courtroom was also Louis E. Galea, director of Barclays Bank Malta who, although a rival, had earlier on offered bridging finance to the National Bank. Now, according to Mintoff’s statement in Parliament, Barclays would be a partner in a new banking venture which would rise out of the ashes of the National Bank, looking more clearly that, as in Edgar Mizzi’s words, Galea had truly "swallowed the pill."
Both Galea and Mizzi said that since the government had taken over the licence, the shares on that particular day had no value. Busietta contested their claims in Court, saying the Court had to see whether the removal of the licence was legal and that no circumstance such as this could remove the intrinsic value of the shares, consisting in the true proportional share of the net assets of the company up to the moment of the ‘takeover’, having also to take into account the cash deposits of millions of liri, cash in the vaults, the value of the 25 branch offices and other assets of the bank.
Dr Staines, secretary to the bank’s board, also seemed to favour the theory of temporary ‘nil’ value: "That day we did not have the professional help of our usual lawyer as co-curators….because the sitting was organised so hurriedly that his presence to defend our case was precluded, neither did we have time to produce expert witnesses such as qualified accountants who could really value the shares.
"At one point, the judge, who was visibly embarrassed by the messages that began to arrive from Castille, said that he had reached a ‘complete stop,’ or words to that effect, and that he could not see how he could accept the application for the free transfer of shares."
Two hours had passed since the start of the sitting. It was 6.00 pm, and Mintoff was already in Parliament awaiting the Court decision as he delivered his speech on the bill he intended to pass for the hand-over of business from the National Bank to the government.
Edgar Mizzi came back to Court and argued that since Count Sant Fournier and Marquis Scicluna had some small deposits in the bank, if their shares were ceded to the government as Mintoff wished, these would eventually be ‘collectible’ after the bank reopened for banking business. If not, even these deposits would be in danger. Throughout the process of the Court case, the judge had to take telephone calls from his private chambers. About 20 minutes later, he returned to the courtroom to inform those present that Mizzi was on his way again from the Prime Minister’s office to give evidence on why the shares had no value.
Busietta contradicted Mizzi in Court, telling him each share was worth at least Lm250. Mizzi replied that if the shares were not surrendered the government would just keep the bank closed. Busietta told Mizzi that the government had prevented the National Bank directors from selling their shares to third parties, and that the government was monopolising the market.
Judge Xuereb turned to Busietta to ask him whether he wanted to give any evidence. Edgar Mizzi had left the courtroom again: "Your Honour," Busietta said, "if I give evidence, you would tear up that decree." According to Busietta, Xuereb sighed and said, "I understand."
After signing the decree authorising the transfer gratis of the shares of Count Sant Fournier and Marquis Scicluna, the Judge told the shareholders present how much he regretted the way things had developed during the sitting and not having retired from office before the case came before him. But although Attard Montalto, Busietta and Baron Scicluna signed away the shares, Alfred Delia, co-curator of the Scicluna shares, did not follow suit. This did not perturb Government, which still considered the share transfer as valid.

"They have just told me we have the shares"
In Parliament that day, Mintoff was explaining in rush fashion the intricacies of erecting a Council of Administration to take over the activities of the National Bank of Malta. It was late in the evening, and Mintoff had already informed both sides that the marshals were on the lookout for shareholders, tracking them down. In Parliament that evening there had been little opposition from the Nationalists:
Mintoff: "…this is the position. We are going to do this tomorrow. And I wish that as soon as we pass this law, I‘ll be certain, and as soon as I’ll have the signatures, I’ll try to go on television even for five minutes to say what will happen tomorrow. And that is why I am hurrying up myself, because if we want to save this situation let’s not dilly-dally for long or else what we are trying to do will amount to nothing."
Alexander Cachia Zammit (PN): "Mr Speaker, I wish to ask a question to the Prime Minister. Maybe there is a certain misunderstanding and I wish the Prime Minister to clarify this because we would like to help. Regarding the signature of the shareholders the government is expecting: is the government expecting the ones from the Second Hall only?"
Dom Mintoff: "No. Allow me."
ACZ: "Excuse me. The second question…."
Mintoff: "If the Second Hall shares come we’ll have extra already."
ACZ: "Now, I shall ask another question. The signature that the government is expecting: what is this signature it is expecting?"
Mintoff: "Look, let’s understand each other a little bit. Let’s do this."
ACZ: "This to be clear that there is no misunderstanding."
Mintoff: "Yes. What is the normal process contemplated by the Banking law? Let’s see this because if we don’t we cannot understand."
ACZ: "To avoid any misunderstanding."
Mintoff: "Good… If we had proceeded normally, there would be a Controller and as the position is we would have arrived at liquidation… In these circumstances, the shareholders would have lost theirs, surely. You know what ‘liquidation’ means. First it’s the shareholders’ blame, you take everything they have, then you start paying the depositors. Now…"
ACZ: "If there is bankruptcy eh."
Mintoff: "But that’s what liquidation means, bankruptcy. Of course! What do you want to do? If you open there’s been no bankruptcy. Allow me mate. The law contemplates that you either open, or else bankruptcy. There’s no other road. We are finding another… that is why we are doing another law. Isn’t that so? So what does this mean? It means those who have the shares bye-bye… and who has shares and deposits these are saying: ‘If I lost the shares I’ll do whatever I can to save my deposits.’ Let it be understood, there’s no altruism here, or some form of craziness from their part…Those who have shares are courteously saying: ‘Listen, since my position has finished, I have no reason to do harm to someone else.’ There is the moral side as well. However, apart from that, there is the other side that who has the shares and has deposits and wants to save as much as they can from their deposits, these will not opt for liquidation of the bank. As much as possible, definitely not pound for pound, which they said yesterday. That is why I told you not to rush with the pound for pound compensation."
At that moment, a messenger arrived by the Prime Minister’s side to inform him of the outcome of the application in front of the Second Hall of the Civil Court:
"They are telling me that the result of the Second Hall is alright," Mintoff said to applauding from the House. Mintoff had done it. In one day, he had managed to collect the two-thirds of shareholders signatures which he needed to take over the bank.
Now all he needed to do was pass the law that would crystallise his nationalisation drive.