Annual report 2006 - Dexia.com

3. Indictment of Dexia Bank in Belgium in the criminal
investigation against the LHSP directors.
On June 24, 2003, Dexia Bank announced that it had been
indicted in the criminal investigation relating to LHSP. The
indictment of Dexia Bank concerns offences allegedly committed
between July 2, 1999 and September 1, 2000 by Artesia
Banking Corporation.
The investigation is now officially closed and the prosecutor
has sent a “draft writ of summons” to the parties that are
likely to be prosecuted, including Dexia Bank. According to
the draft, Dexia Bank will be prosecuted for various offences,
among which forgery in the annual financial statements
of LHSP (valsheid in de jaarrekening/faux dans les comptes
annuels) and market manipulation (koersmanipulatie/manipulation
de cours). The draft, which is subject to changes, alleges
in substance that Artesia Banking Corporation has aided and
abetted LHSP in the creation of fictitious revenue, by granting
a USD 20 million loan to Messrs. Lernout, Hauspie and
Willaert, whilst Artesia BC allegedly knew that the management
of LHSP would utilize these funds for improper revenue
recognition.
Dexia Bank considers having serious grounds for contesting
these charges.
Several parties have introduced a claim for damages in the
criminal proceedings. The largest civil party is Deminor, representing
– according to its website – 11,000 shareholders
of LHSP, with an aggregate amount of alleged damages of
approximately USD 200 million in principal. There are about
400 other individuals that have reported themselves as civil
parties. It is likely that not all of the potential applicants have
already introduced their claim; those who have done so, have
in most cases not yet stated and or provided evidence of the
alleged losses.
It should be added that in January 2003, Dexia Bank has itself
lodged a complaint with the examining magistrate against
persons unknown, claiming compensation.
As yet it is very difficult to give an opinion on the likely outcome
of the proceedings or on the level of the financial risk
which Dexia Bank would face, if the charges brought against
it were upheld. Dexia Bank underlines its innocence in this
matter and contests the charges brought against it.
4. Civil proceedings against Dexia Bank in Belgium
4.1. LHSP receivers’ claim
In July 2005, the receivers of LHSP filed an action against
twenty-one parties, including Dexia Bank, for an indemnity
against the net liabilities of LHSP in bankruptcy. According to
the receivers’ provisional assessment of the claim, the claim
would amount to approximately EUR 439 million. This claim
is not likely to have any development until after the end of
the criminal proceedings because of the principle “le criminel
tient le civil en état”.
4.2. Claim by individuals
Certain civil claims have been filed by groups of investors in
LHSP shares against various parties, including Dexia Bank. The
main claim was filed by Deminor on behalf of 4,941 investors.
The claimants seek damages for their losses, which have not
been assessed yet. These claims, to a large extent duplicative
of the claims introduced in the criminal proceedings, are not
likely to have any development until after the end of the criminal
proceedings because of the principle “le criminel tient le
civil en état”.
5. Civil proceedings against Dexia Bank in the United
States
5.1. LHSP Litigation Trustee’s claim
In 2005 the Litigation Trustee for the LHSP Litigation Trust
filed an action against Dexia Bank. The Litigation Trustee
seeks to recover damages from Dexia Bank for entering into
loan transactions, which he claims amount to aiding and
abetting breaches of fiduciary duty by the LHSP Management.
He also seeks to disallow or subordinate Dexia’s claims in
the US bankruptcy proceedings. This action is, essentially, a
duplication of the above-mentioned LHSP receivers’ claim.
5.2. Claims by investors
Following the announcement of Dexia Bank’s indictment in
Belgium, several civil claims were introduced in the United
States against Dexia SA and Dexia Bank arguing that Dexia
Bank is liable for the losses suffered by LHSP shareholders.
Dexia Bank disputes the merits of all of these claims.
5.2.1. Class actions
Two class actions have been brought on behalf of investors
in LHSP shares against Dexia Bank and a host of other parties
named in prior litigation, including the principals of LHSP.
a) NASDAQ class action
The first class action was served on Dexia Bank in February and
March 2004 in the name of three individuals acting for themselves
as well as on behalf of a class of purchasers of LHSP
shares on the NASDAQ stock market between August 19,
1998 and November 8, 2000.
Although Dexia Bank is of the opinion that none of the claims
of the plaintiffs is well-founded, Dexia Bank has, in view of the
large costs of defence and the uncertainty about the outcome of
the proceedings, decided to conclude a settlement agreement
with the NASDAQ class plaintiffs. To this end, a memorandum
of settlement has been concluded on February 9, 2007, which
in its principal terms provides for the payment by Dexia Bank
of an amount of USD 60 million in exchange for an unconditional
release of all claims against Dexia SA and Dexia Bank and
any of their past or present affiliates, officers and employees,
relating to purchases or sales of LHSP common shares on the
NASDAQ Stock Market during the period from August 19, 1998
through and including November 8, 2000 (the “class period”)
or to purchases of call options to acquire LHSP common shares
or sales of put options related to LHSP common shares on any
United States-based options exchange during the class period
by all investors who will participate in and/or be bound by the
settlement agreement, without any recognition on behalf of
Dexia SA or Dexia Bank of any wrongdoing or liability. This settlement
is still subject to court approval.
RAPPORT DE GESTION
COMPTES CONSOLIDÉS
ANNUAL
FINANCIAL STATEMENTS
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