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DNB 'have stumbled' in court again

2012-01-13

PRESS RELEASE
AB DnB bankas, the third-largest bank in Lithuania, fully owned by the largest Norwegian bank DNB, has lost one more case in favour of the client who suffered losses on complex bank investment products offered by the bank.

In Wednesday afternoon, the Vilnius Regional Court pronounced a decision in the case brought by small entrepreneur Sigitas LUSCINSKAS who disputed banking activities and in which Mr. Luscinskas requested for annulment of the agreements which led to the losses.

The court admitted the action partly by invalidating the client's agreements signed with the bank regarding the purchase of bonds issued by the bank and, at the same time, borrowing money to finance the purchase. The court essentially upheld all major parts of the client's claim by refusing to award only moral damages.

Mr. Luscinskas suffered loss of 537 thousand Litas (1.2 million NOK, or 156 thousand EUR) due to the investment strategy intruded on him by the bank. When the bank sold bonds to the client in October 2007, thus actually borrowing money from the client, in addition, it offered the client to buy the bonds financing by funds borrowed from the same bank. Return on the bonds issued by the bank and sold to the client is volatile, while the client borrows funds from the bank at a fixed interest rate. The court found that the bank did not perform its obligation to inform properly the client on the risks associated with sales of this investment product to a non-professional investor.

'The Victory of our association member achieved in the court is not only his victory, but also a joint victory of still several hundred Lithuanian citizens who have suffered similar losess of investment 'products'. We can expect that such event, already the second one during the last few weeks, will result in more bank clients determined to defend their interests in court, rather than remain silent,' said Kestutis KUPSYS, Executive Director of the Association 'For Honesty in Banking'.

According to the data published by The Lithuanian Securities Commission, even 640 non-professional investors had acquired similar products offered by the bank for more than LTL 700 million (approx. 1.56 billion NOK, or 200 million EUR). It is estimated that total losses of the bank's clients due to such investment schemes may reach approx. 100 million Litas (220 million NOK, or 29 million EUR).

In December, at least two unfavourable news from courts reached DNB bank. At the beginning of the month, bank's customer Rimvydas BAJORINAS reached in Vilnius Regional Court that his agreements signed with DNB bank in 2007 regarding the acquisition of equity-linked bonds would be invalidated. The court found that the bank improperly performed an obligation of the financial institution to a client to disclose all information relevant for risk assessment and investment decisions. It was also decided that the bank's requirement for gaining from the investor interests and estimated penalty charges that amount to more than 233 thousand Euros (over 800 thousand Litas, or 1.8 million NOK) is unfounded.

One week after the Vilnius Regional Court's decision in Mr. Bajorinas case, the Supreme Administrative Court of Lithuania reopened the case for the nominal fine of 15 thousand Litas (33 thousand NOK, or 4 thousand EUR) imposed on the DNB bank by the Lithuanian Securities Commission for misleading the investors. In July 2011, the request to reopen the case was brought by a third party, the citizen of Lithuania who suffered from actions of DNB bank. His goal was supported by two local consumer activist groups – both the Investors' Association and the Association 'For Honesty in Banking', as an outcome of the case is significantly important not only to the client, but also to a large number of other citizens of Lithuania who suffered from similar actions of the bank.

According to the data of the Association 'For Honesty in Banking', currently, not less than 10 cases regarding the bonds issued by DNB bank are dealt in courts of Lithuania, and at least one case regarding similar investment product offered by the parent bank of Lithuanian DNB branch have already reached the Supreme Court of Norway. According to preliminary data, at least 40 persons have applied to the courts in Lithuania already; claims of some of them are dealt with together.

Interests of Mr. Luscinskas and Mr. Bajorinas in the cases were represented by NORDIA BAUBLYS & Partners, Professional Partnership of Advocates. Earlier this week, Thomas MIDTEIDE, the representative of DNB parent bank in Norway, stated to the Norway's largest newspaper 'Aftenposten' that they will appeal the court decisions unfavourable to the bank (see http://www.aftenposten.no/okonomi/DNB-domt-for-a-ha-lurt-kunder-i-Litauen-6738327.html).

Association 'For Honesty in Banking'
Executive Director Kestutis KUPSYS (Kęstutis Kupšys)
Phone + 370 698 76444
info@sazininga-bankininkyste.lt
NORDIA BAUBLYS & Partners, Professional Partnership of Advocates
Attorney-at-law Marius Liatukas
Phone + 370 5 248 7384
Mob. phone + 370 620 19929
marius.liatukas@nordia.lt
www.nordiabaublys.lt

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