A Belgian firm specialising in the recovery of investment losses has filed a complaint on behalf of a group of 72 legal entities, representing 155 institutional investors.
The firm, Deminor, is seeking damages in the amount of DKK 2.67bn (€358m) from Danske Bank’s former chief executive Thomas Borgen, who resigned in September 2018 after five years in the role.
It follows Danish prosecutors, in May 2019, charging Borgen over his involvement with what has been described as “one of the world’s biggest money laundering scandals”.
Failed to disclose
According to a statement, Deminor believes that investors were misled as to the bank’s true situation with regard to illegal activities in Estonia.
Some €200bn is believed to have passed through the bank’s branch in the Baltic country between 2007 and 2015.
Knowing the extent of the “money laundering activities and associated material risks in February 2014”, Borgen was responsible for “[ensuring] that the bank – at the time – should have disclosed this information to the public, which was not the case”, Deminor stated.
Expert Investor reached out to Danske Bank, but a spokesperson said that it does “not comment on individuals”.
“Deminor has not issued legal proceedings against the bank at this stage. With regards to the ongoing civil claims against the bank, we continue to defend our position.”
Chances of success
It is not clear when the case will head to court, as the issuance of the writ of summons is just the beginning of the proceedings against Borgen, Deminor manager Joeri Klein told Expert Investor.
“The court will set an agenda for the proceedings and the adverse party will have to file its first reply to our complaint.”
He was unable to reveal the names of any of the investors, as the firm is “contractually bound by strict confidentiality obligations”.
As the group is seeking such a large sum from a single individual, Expert Investor asked Klein what his expectations are.
“It is impossible to predict the chances of success at this stage, but obviously we believe strongly in the case, otherwise we would not have started it,” he said.
His colleague Edouard Freemault, partner at Deminor, added: “Danske has a directors and officers insurance policy covering the civil liability of its senior management in such instances, and it is standard practice that a CEO of a listed company has an indemnification clause in his/her contract, meaning that his/her employer covers his/her civil liability in case of negligence.”
Whistleblowers and audits
It was six years ago, according to a report from law firm Bruun & Hjejle, that Borgen and other members of the senior management team were briefed in detail by an internal audit team about money laundering at the Estonian branch.
The report stated: “In early 2014, following a report from a whistleblower and audit letters from group internal audit, it became clear that AML procedures at the Estonian branch had been manifestly insufficient and inadequate.
“It was also realised that all control functions have failed, both within the branch and at group level.”