Annual report 2006 - Dexia.com

RAPPORT DE GESTION
CONSOLIDATED
FINANCIAL STATEMENTS
COMPTES SOCIAUX
In February 2007, the dispute with Stonington was brought to
a final end through the conclusion of a settlement agreement.
On December 31, 2006, the cases against James and Janet
Baker and TRA/Filler Trust were still in the discovery phase
(request for production of documents and deposition by parties
of witnesses).
6.2.6. L&H Holding
On April 27, 2004, the bankruptcy receiver of L&H Holding
summoned Messrs. Lernout, Hauspie and Willaert, along with
Banque Artesia Nederland (BAN) and Dexia Bank, to pay the
principal amount of USD 25 million.
This is connected with a USD 25 million loan granted to Mr.
Bastiaens by BAN in July 2000 for the purposes of the acquisition
by Mr. Bastiaens of LHSP shares owned by L&H holding.
The former Artesia Bank issued a bank guarantee in favor
of BAN for an amount of USD 10 million. The selling price
of USD 25 million was credited to three personal accounts
opened with BAN by Messrs. Lernout, Hauspie and Willaert.
Taking the view that this money was due to L&H Holding, the
L&H Holding bankruptcy receiver is claiming its repayment.
Dexia Bank vigorously contests the grounds for these
applications.
6.2.7. Banque Artesia Nederland
In October 2006, Dexia Bank sold its affiliated company Banque
Artesia Nederland (BAN). In the context of this operation,
it has been agreed, in essence, that Dexia Bank will bear the
financial consequences of the LHSP matter for BAN, capped at
an amount equal to the price paid by the purchaser.
Most of the pending procedures relate to the loan granted
by BAN to Mr. Bastiaens (see paragraph 6.2.6., above). They
include the claim introduced by the receiver of L&H Holding
both in the criminal investigation relating to LHSP (in the form
of a burgerlijke partijstelling/constitution de partie civile) and
before the civil court (see paragraph 6.2.6., above).
In addition, BAN is involved in a number of procedures pertaining
to Parvest shares acquired by Messrs. Lernout, Hauspie
en Willaert with the proceeds of the sale of the LHSP shares to
Mr. Bastiaens. The investigating magistrate in the Belgium criminal
case, L&H Holding and KBC Bank have all made claims
in relation to these shares and proceeded to their provisional
attachment in the hands of BAN. In addition, the Luxembourg
Court of Appeals has issued a decision on July 12, 2006 at
the request of Crédit Agricole Indosuez Luxembourg (CAIL)
by which BNP Paribas Luxembourg has been ordered to deliver
the Parvest Shares to CAIL by June 30, 2007 or to pay to
CAIL the countervalue of these Parvest shares on June 30,
2007 if the latter have not been delivered to CAIL prior to
July 1, 2007. The Luxembourg Court of Appeals has condemned
BAN to indemnify and hold BNP Paribas Luxembourg harmless
against any damage deriving from its condemnation.
As a consequence, BAN is at risk to have to pay BNP Paribas
Luxembourg the countervalue of the Parvest shares, if the
provisional attachments on these Parvest shares are not lifted
prior to June 30, 2007.
BAN has lodged an appeal against the decision of the court
of appeals of Luxembourg before the supreme court (cour de
cassation).
6.2.8. Provisions and impairments
On December 31, 2006, the exposure of Dexia Bank on the
outstanding claims relating to credit facilities granted in the
Lernout & Hauspie file amounts to some EUR 101 million
(see paragraphs 6.2.1., 6.2.2. and 6.2.7.). On the same date
impairments for the Lernout & Hauspie file have recorded for
a total amount of some EUR 90 million. Dexia Bank expects
to be able to recover the difference in view of the securities
provided.
The relevant provisions have been charged to the 2006 financial
statements in order to cover the residual risks linked to
the US cases for which no settlement has been concluded,
as well as for costs and legal fees related to the whole of
the L&H procedures mentioned in paragraphs 6.2.1. to 6.2.6.
above. Dexia strongly challenges the validity and the merits of
all these claims.
Dexia does not disclose
• the amount of the provisions relating to the LHSP US legal
proceedings for which as yet no settlement has been concluded
and
• the settlement amount reached with Stonington, mentioned
below in paragraph 6.2.5.2.b).
Dexia believes that to do so could seriously prejudice the outcome
of the still pending LHSP legal proceedings.
6.3. INHERITANCE DUTIES
The enquiry opened by the judicial authorities on September
28, 1999 into Dexia Bank and a possible fraud involving
inheritance duties seems to have ended. Four former executives
were accused at the end of March 2004. However that
accusation did not imply the guilt of the persons concerned,
in whom Dexia maintains its confidence. Dexia Bank confirms
that the necessary internal audit and IT procedures have enabled
it to abide by the directives issued in this regard by the
CBFA. There was no fundamental development in this file
during 2006.
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Dexia / Annual Report 2006