Information on MEL discussion:

The public discussion relating to MEL (now Atrium) and Meinl Bank often features statements that appear to be contradictory or unclear. We want to take this opportunity to present the position of Meinl Bank regarding the most important of these questions, and by doing so contribute to the clarification of the essential issues.

The role of Meinl Bank in the MEL proceedings:

Meinl Bank became the subject of public debate in connection with property company Meinl European Land (MEL). Price losses, triggered by the most serious economic and financial crisis since the 1930s and to which the majority of listed companies, particularly in the property sector, were subjected, were scandalised and associated with Meinl Bank. In fact, Meinl Bank functioned within a precisely defined legal framework, primarily as an investment bank and an advisor to MEL. Naturally, the company operated within the bounds of applicable law at all times.

In the course of the public discussion, six domestic institutions have already issued statements confirming the legal opinion of Meinl Bank on fundamental questions:

The Austrian Takeover Commission has confirmed that the Austrian Takeover Act did not apply to MEL. By doing so, it confirmed that MEL was controlled by its own independent management in Jersey, and not by Julius Meinl or Meinl Bank.
The Procurator Financial, or the attorney for the Republic of Austria, and the Independent Administrative Tribunal Vienna confirmed the Meinl Bank position that the buyback of MEL certificates in 2007 did not have to be disclosed to the public.
Oesterreichische Kontrollbank and the Vienna Stock Exchange shared the legal opinion of the Bank regarding the question of the distinction between shares and certificates: holders of certificates are treated equally to actual shareholders in all key shareholders’ rights.
The Ministry for Consumer Protection affirmed the principally valid legal position that independent financial advisors are required to answer for their consultation services, and that they are responsible for these.
In its statement from December 22, 2010 the Jersey Financial Services Commission (JFSC) said that the buy-back by Meinl European Land (MEL) in 2007 of ADC’s listed on the Vienna Stock Exchange representing issued shares in the company did not breach Companies Law. This statement was the conclusion of an Investigation of the Jersey Financial Services appointed Inspectors.

The buyback of MEL certificates

Shortly before the international economic and financial crisis erupted – between the end of February and the end of July 2007 – MEL bought back certificates with a value of 1.8 billion euros. The aim was to make a package of certificates available for a strategic investor. MEL is subject to the law of Jersey, according to which buybacks of own certificates are permitted to an unlimited extent, and therefore legally admissible, as had been indicated in all the prospectuses of the company. In October 2009, the Procurator Financial, addressing the issue of the duty of disclosure, confirmed that MEL was not required to report the buyback of the certificates.

MEL as a company and the role of Meinl Bank

Decisions for MEL were reached by the MEL Board alone. Meinl Bank was subject to a clearly defined contractual relationship with MEL. The Austrian Takeover Commission also established that the Austrian Takeover Act did not apply to MEL. In this way, it is confirmed that all decisions were carried out by an independent MEL management, and not by Julius Meinl or the Meinl Bank, as was repeatedly claimed.

The advertising of MEL

In connection with investor lawsuits, it is often claimed that MEL investors were misled by advertising measures of MEL or Meinl Bank – an interim availability of the Supreme Court relating to an info folder of MEL also tends in this direction. This does not correspond to the facts. MEL presented the company situation at the time according to the facts, and their advertising statements do not differ qualitatively from those of other property firms whose rates had also fallen in the course of the economic crisis. A representative IMAS survey also comes to the unmistakeable conclusion that advertising is not relevant when it comes to the reaching a decision over the purchase of property shares. “While advertising may draw attention, the decisive thing for the purchase is mainly a consultative talk.” Diverse judgements in civil actions also confirm the legal opinion of Meinl Bank. On 30 December 2009 onwards, for example, Salzburg Regional Court confirmed that the sales documents and prospectus of Meinl Success Finanz AG had pointed out the possibility of value fluctuations, and that every average person should be aware of the risk.

Share purchase on approval

In connection with MEL investor claims, an approach to capital market products crystallises which crassly contradicts the logic of the same: in the event of rising rates, profits are gained, and when rates are falling, legal action is taken. If the method of ‘take the profit when prices are rising, and go to court when prices are falling’ were to become established, it would have fatal consequences for domestic capital markets. It is in the nature of financial markets that they are volatile.

Various judgements in civil claims also confirm the legal opinion of Meinl Bank on this point. On 30 December 2009, for example, Salzburg Regional Court confirmed that the sales documents and prospectus of Meinl Success Finanz AG had indicated the possibility of value fluctuations, and that every average person must be aware of the risk when purchasing shares.
To date, a total of some 20 judgements are present in the first instance. Around half the verdicts find in favour of Meinl Bank, confirming the view that investors who invest in shares or certificates must also reckon with price losses.

The role of financial service providers in consultation sessions

The vast majority of consultation sessions that led to the purchase of MEL certificates were carried out by independent financial service providers. According to the valid legal position – also backed up by the Ministry of Consumer Protection – these advisors must answer for their advice services, and are responsible for these. Currently, over 1,500 civil claims by investors are due in connection with MEL. Most of the claims relate to alleged or actual errors in advice given to customers by independent financial advisors. The legal position as invoked by the bank is unmistakeable: according to the Supervision of Securities Act, advisors are liable for any kind of errors in their consultation. Despite this, the Bank has formed sufficient reserves and provisions for these proceedings, to the tune of some 60 million euros, and Meinl Bank is capitalised way beyond the legal requirement.

Meinl Bank has voluntarily agreed to socially responsible solutions with the Chamber of Labour and legal firms Christandl and Niebauer. The solutions benefits around 6,000 MEL small investors and requires the Bank to expend around EUR 18.3 million. In cases where the settlement is accepted – provisional figures show that the solution is now widely accepted by investors – investors receive one-third of the difference between the purchase amount and the lower value of the investment following the price losses, and transfer their claims to Meinl Bank.

Procedures of authorities:

In the course of the public discussion surrounding MEL and Meinl Bank, the authorities, and in particular the Vienna State Prosecutor’s Office, have played a considerable role, and continue to do so.
At this point, we want to present the fundamental points from the viewpoint of the Bank in chronological form:

The proceedings of Vienna State Prosecutor’s Office against Meinl Bank, and in particular the detention awaiting trial imposed against Julius Meinl on 1 April 2009, were based on the report of a court expert dismissed from office in July 2009 (on the grounds that he was prejudiced and not qualified to look into capital market questions), and on a police report containing statements which were demonstrably false in substance. As long ago as June 2009, the renowned Austrian constitutional law expert Univ. Prof. Heinz Mayer had established the illegality of the detention awaiting trial in a report.

In the view of Meinl Bank, a prejudicial pattern of action is becoming apparent on the part of Vienna State Prosecutor’s Office: by employing media campaigns designed to have the maximum effect against Julius Meinl personally, it is aiming to build up a body of prejudice against him. The high point of this was the stage-managed arrest for the benefit of the media, followed by a record bail figure designed to produce maximum public effect, and the application for the confiscation of properties, also played out in the media. The fact that Vienna Higher Regional Court eventually rejected this confiscation around a year later is far less interesting than the negative effect of the application in the public eye. The strategy apparent here, of denigrating people in public, contradicts the legal requirement of objectivity, according to §3 of the Code of Criminal Procedure, which the State Prosecutor’s Office is also obliged to meet. This approach also contravenes the principle of appropriateness and proportionality laid down in §5 of the Code of Criminal Procedure and in the European Convention on Human Rights.

Chronology of events since 1 April 2009

1 April 2009	Julius Meinl is detained awaiting trial. This is clearly illegal, since the detention is based upon: a preliminary report written by a prejudiced expert unqualified to offer an expert opinion – in addition to this, the report contains over 80 serious errors over just 25 pages a police report – which is based upon false assumptions and claims.
3 April 2009	Julius Meinl is released after the State Prosecutor’s Office demands that a bail payment of EUR 100 million be made. *The level of the bail contravenes the requirement of appropriateness and proportionality*
April 2009	Vienna State Prosecutor’s Office applies for various properties of Julius Meinl to be confiscated. The application is rejected by the Independent Court in May 2009. Despite this, the State Prosecutor’s Office submits an appeal, which is eventually rejected by Vienna Higher Regional Court in March 2009.
May 2009	Julius Meinl is granted access to the preliminary report dated 27 March 2009 for the first time, followed by the police report dated March 2009 a few weeks later. *This is clearly illegal. Under the law, every defendant has the right to comprehensive access to the records to enable him to defend himself.*
June 2009	In a report, constitutional law expert Univ. Prof. Heinz Mayer arrives at the conclusion that the detention of Julius Meinl in April 2009 is illegal: “If the direction of Vienna State Prosecutor’s Office of 27 March 2009 in the present case is viewed against the background of the prevailing teaching and jurisdiction, there is no doubt that it is unlawful. The circumstances that Vienna State Prosecutor’s Office cites as the reason for the risk of flight are either false, because they are not present, or they are not appropriate for constituting a concrete risk of flight.” *There is no reaction from the State Prosecutor responsible.*
July 2009	The expert is dismissed from the Independent Court for prejudice. Despite this, he submits an invoice for over EUR 700,000. *The State Prosecutor responsible still does not submit an objection against the dismissal on 13 July 2009.*
Summer 2009	An application is submitted to the State Prosecutor for a statement on the erroneous police report. *There is no reaction from the State Prosecutor responsible.*
September 2009	Vienna Higher Regional Court confirms the dismissal of expert Thomas Havranek for prejudice. As an essential cornerstone of the detention, Havranek’s report should become ineffective at this point at the very latest. Despite this confirmation of the illegality of the detention, there continues to be no reaction from the State Prosecutor responsible.
September 2009	Application submitted to the State Prosecutor for the repeal of the detention awaiting trial of Julius Meinl: The 2 cornerstones of the detention, a) that the police report is erroneous, and b) that the report is erroneous and no longer relevant, have now been removed. *No reaction from the State Prosecutor’s Office.*
October 2009	The Procurator Financial – “lawyer for the Republic” – confirms that there was no requirement to disclose the buyback of MEL certificates in 2007. A written pleading by the Procurator Financial states the following: “According to Paragraph 82, Clause 9 of the Stock Exchange Act in the version applicable at the time, MEL was not required to disclose the buyback of the certificates”. As a result, the Republic of Austria officially confirms the legal opinion of the proceedings advanced since the beginning by MEL and Meinl Bank.
November 2009	In a written pleading, Vienna Stock Exchange unmistakeably establishes that holders of ADCs (certificates) were treated equally to shareholders.
December 2009	After an investigation lasting two years, the Austrian Takeover Commission establishes that MEL is not subject to Austrian Takeover Law. The unmistakeable result of this is that the seat of the MEL was Jersey and not Vienna, and that consequently MEL was controlled neither by Meinl Bank nor Julius Meinl, but by the MEL Board.
December 2009	Since 5 December 2009, all penalties issued by the Financial Market Authority (FMA) against Meinl Bank in connection with MEL have been repealed. Vienna Independent Administrative Senate (Unabhängiger Verwaltungssenat or UVS) had been looking into the issue, and the Bank was sent the appropriate notification yesterday. In total, three decisions of this nature, which accused representatives of the Bank of misleading advertising and market manipulation, were issued between October 2007 and February 2009.
December 2009	Independent Court insists upon a copy of the statement on the police report at the police. *Only now, on 16 December 2009, does the State Prosecutor commission the police with the task of delivering a statement on the erroneous police report.*
January 2010	Statement by the police on the erroneous police report which led to the detention is available. *Result: the police obtained the information which led to the detention when used in its report from erroneous media reports. – Still no reaction from the State Prosecutor.*
February 2010	Vienna State Prosecutor’s Office appoints Fritz Kleiner and Andreas Freudenmann as new experts. The experts are released from their obligation to report costs from the very beginning. The appointment is announced in the media before the participants are informed it is to take place. In the opinion of the Bank, moreover, the appointment contravenes the legally required objectivity order throughout.
February 2010	After essential documents are removed from the access records – including, amongst others, the interrogation protocols of Rupert-Heinrich Staller, whose statement was essential for the detention of Julius Meinl – Meinl submits a claim for infringement due to the refusal to access the records. *On 25 February 2010, the Independent Court finds in favour of this appeal due to infringement, and confirms that the refusal to access the records does indeed represent an infringement.* The reasoning of the Court is as follows: “Access to records during the preliminary and main investigation, and thereby knowledge of the content of those records, forms the foundation of a thorough defence and comes under the principle of due process, under which §51, Clause 1 of the Code of Criminal Procedure states that the defendant is explicitly granted a subjective right to access the mediation record.”
June 2010	*State Prosecutor corrected by Independent Court* Decision by Vienna Regional Court for Criminal Matters deprives fraud allegations of any basis – essential sections of breach of trust allegations are qualified. Due to the fact that still some research by the state prosecutor is underway, the bail is not yet restituted. Decision in that matter is now with court of next higher instance.
December 2010	*Slovakian Constitutional Court declares house search against Meinl Bank in Bratislava to be illegal and unconstitutional* On the initiative and in the presence of representatives of the Vienna State Prosecutor’s Office, as well as in the presence of assistants of the dismissed court expert Thomas Havranek, Slovakian authorities carried out a house search in Bratislava in February 2009. Documents belonging to Meinl Bank were taken to Austria under pressure from the Vienna State Prosecutor’s Office. This was condemned as unlawful and a clear breach of constitutionally protected basic rights in a session of the Third Senate of the Slovakian Constitutional Court on 7 December 2010. According to the Slovakian Constitutional Court, the Slovakian State Prosecutor’s Office is compelled to restore the lawful state of affairs. The Slovakian Constitutional Court is demanding that the Vienna State Prosecutor’s Office return all the seized documents immeiately, and that it remove these in any form from the files. *To date, the documents have not been removed from the files as required.*
December 2010	The Jersey Financial Services Commission (JFSC) declares in a statement dated December 22, 2010 that the buy-back by Meinl European Land (MEL) in 2007 of ADC’s listed on the Vienna Stock Exchange representing issued shares in the company did not breach Jersey Companies Law. This statement was the conclusion of an investigation by the Jersey Financial Services appointed Inspectors.
September 2011	*Investigation against chief investigator in the Meinl Case by State Prosecutor due to suspicion of abuse of office.* The chief investigator gave false statements in the police report about a house search carried out in Switzerland in April 2011. In this report, concrete statements are made about the questioning of the vice-head of a subsidiary of Meinl Bank – even though this person was demonstrably not in Switzerland at the time in question.
October 2011	*Vienna State Prosecutor ceases proceedings against chief investigator in Meinl case for abuse of office within short time.* Despite the fact that his statements in the police report about the Swiss house search are evidently false and these are not called into question by the State Prosecutor’s Office. The Bank has filed the appropriate complaints in this case.
October 2011	*Vienna State Prosecutor’s Office commissions new court expert.* More than one-and-a-half years after the commissioning of the court experts Kleiner and Freudenmann, Martin Geyer now becomes the fourth such expert to be appointed. Geyer is supposed to take over the issue of fees from Fritz Kleiner. Media reports refer to rifts between court expert Fritz Kleiner and Vienna State Prosecutor’s Office, because the Office is reported to have pressurised the court expert. The Bank has filed complaints against court expert Martin Geyer. The facts would show that Geyer had been an accomplice to the State Prosecutor’s Office contrary to its legal mandate.