JC Flowers, suspiciously chosen by the AREB to manage the assets of the extinct BPA

Since its intervention in March 2015, the Banca Privada d’Andorra (BPA) became a target for the vulture fund JC Flowers (JCF), known in the international financial network for making profits from businesses by purchasing their assets at bargain prices. It is now known that the Andorran government handed over the bank entity to J. Christopher Flowers, the company’s CEO, to make the most profit from the worst crisis the Andorran financial sector has ever seen.

JC Flowers was aware of the process for restructuring the Spanish financial system that started with the 2008 crisis. Taking advantage of this, they acquired various nationalized entities that were in the hands of the Fund for Orderly Bank Restructuring (FROB). All this process was led by the Andorran government through the Andorran State Agency for Resolution of Banking Institutions (AREB) and the Andorran National Institute of Finance (INAF), guided by the firm Key Capital Partners, who created a non-transparent structure to expropriate the original shareholders. In other words, they conspired against the shareholders to steal their bank from them.

Moreover, the regulating Andorran authority never revealed why they supported the expropriation of a successful and highly creditworthy financial institution, worth over 500 million euros, instead of a more reasonable restructuring alternative to assess and eventually correct any weaknesses in the anti-money laundering control process.

In an effort to fight back, the Cierco brothers, shareholders of the intervened bank, sued the Andorran Government to claim 365 million euros by way of compensation, stating that Andorra omitted the risks that the suspicions of money laundering represented – suspicions manifested by the American Department of Treasury, led by the FinCEN.

To better understand this mega fraud, it is important to know how a “vulture fund” operates. Its modus operandi simply consists in buying public debts or companies on the verge of bankruptcy at 20%, 30% of their total nominal value, to then gain enormous profits through usurious procedures.

As globally social predators, the name is a metaphor that compares these investors to vultures patiently overflying, waiting to fly towards the rests of weak companies or indebted countries. This is what JC Flowers does. Just like with the Andorran case, they usually bet on “patients” with high recovery chances, namely, States or businesses that are likely to bring their finances back into line and salvage an act of bankruptcy.

In other words, through financial speculations, this “vulture fund” buys debt securities from countries in disgrace at a bargain price, and then litigates in international jurisdictions to claim the total value of those bonds. This, with total disregards to the New York legislation, which states it is illegal to buy a debt with the purpose of litigating against it. So far, one way or another, JC Flowers has been able to evade the sentence established by the standard rules.

Furthermore, it is important to note that the States that are affected by the vulture funds, reduce their budget destined to promote and guarantee economic, social and cultural rights. In so doing, the main affected sector is the population exposed to socially vulnerable scenarios, such as those who suffer from poverty.

This situation has negative consequences. Namely, a drop in foreign capital investments, the ceasing of funding for public work mega structures financed by foreign loans, and the drop in the value of bonds issued by the Debtor State, among others.

In this regard, the provisions within the International Covenant on Economic, Social and Cultural Rights, its Optional Protocol and its Committee’s General Observations, should be specially taken into consideration in the analysis and conflict resolution between Debtor States and their creditors, should these rights be affected. Such is the case of JC Flowers, who was suspiciously chosen by the AREB to manage the assets of the extinct BPA, by buying the “good” funds of Vall Blanc.