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Greek port makes arrests in loan-shark probe

Businessman Dimitris Logothetis, centre, is escorted by plainclothes police in the northern Greek port city of Thessaloniki, Friday, Jan. 20, 2012. Greek police say they have arrested 47 people, including a senior anti-fraud official, a tax employee, a journalist and three policemen, in a crackdown on usury, extortion and money-laundering rackets.

Nikolas Giakoumidis/AP/Nikolas Giakoumidis/AP

A Greek prosecutor launched a criminal probe on Friday of more than 50 people accused of involvement in a loan shark network that allegedly drove one victim to suicide and extorted more than €40-million ($52-million) from businesses in the northern port city of Thessaloniki.

The group, described by police as "a mafia of the city's elite," included: a senior official in SDOE, the Greek financial police; a journalist working for the state television network; a prominent doctor; and several bankers, lawyers and police officers.

News of the arrests sent shock waves through Greece's second city, a lively trade and entertainment hub for the south Balkans that has been severely affected by the Greek crisis and a continuing slowdown in the economies of neighbouring Bulgaria, Serbia and Macedonia.

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The police investigation was triggered by the suicide last June of Leonidas Margiolas, a restaurateur, who jumped from the balcony of his fifth-floor apartment, leaving a note that said he was under pressure from usurers.

Mr. Margiolas, who owned fashionable restaurants in Athens and Thessaloniki, had been unable to meet interest payment at rates of 5 per cent to 10 per cent monthly on loans of more than €600,000 by the usurers' network, police said.

Intensifying the shock of the arrests, the Thessaloniki appeals court prosecutor ordered the detention of Vassilis Papageorgopoulos, a popular former mayor, on charges of embezzling €50-million in social security contributions from the city hall budget.

Evangelos Venizelos, Greek Finance Minister and a leading Thessaloniki politician, was quick to distance himself from the scandal after Greek bloggers claimed he was acquainted with some of the accused.

"What is important is that SDOE has purged itself and, together with the police, has pulled off an outstanding success," Mr. Venizelos said.

It is alleged that the usurers started to operate more than a decade ago, offering protection and loans to small businesses in Thessaloniki and other northern towns. They stepped up their activities in 2009 when local banks clamped down on lending amid a worsening credit squeeze.

About 200 business people are known to have borrowed from the network's four interlinked branches, which included "enforcers" who beat up and kidnapped victims who were late to pay their instalments, a police official said.

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"There were two reason why the network flourished for so long," the police official said. "One was because its victims were too ashamed or frightened to reveal what was going on. The other was because its leaders were people who were normally above suspicion."

Leaders of the group claimed that the large amounts of money found in their bank accounts by victims came from winning tickets issued by the state-controlled electronic gaming company OPAP – an excuse that aroused suspicion since it is widely used by tax-evaders under investigation by the financial police.

Several members of the group were found in possession of winning OPAP tickets that had apparently been bought from company employees, police said.

Ioannis Diotis, head of the financial police, on Friday ordered an investigation of how OPAP – one of Greece's most profitable companies – distributed its winnings.

Copyright The Financial Times Ltd. All rights reserved.

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