After six years of deliberations, judicial investigations and court delays the high-profile Folli Follie concluded this week with an Athens Three-Member Court of Appeals handing down stiff sentences to the main defendants, namely, the three members of the Koutsolioutsos family and two of their top executives, ranging from 10 to 17 years for felonious actions. The defendants were found guilty by unanimous decision on five of the six charges.
Specifically, the court imposed the following final sentences to the defendants:
Folli Follie founder Dimitris Koutsolioutsos: 17 years in prison.
Tzortzis Koutsolioutsos: 11 years in prison.
Aikaterini Koutsolioutsou: 10 years in prison.
The other two convicted top associates of the Koutsolioutsos family were sentenced to 10 years in prison for E.N (initials), while the fugitive Ioannis Begetis was sentenced to 15 years in prison.
The remaining six defendants were acquitted of all criminal charges.
A total of 11 defendants faced charges that included forming a criminal organization; joint and aggravated forgery with a total benefit and corresponding damage exceeding 120,000 euros; fraud committed by complicity against individuals and legal entities, both private and public, causing damage exceeding 120,000 euros; repeated market manipulation and money laundering from criminal activities committed by complicity and repeatedly, among others
Harsher than the bench prosecutor’s recommendation
Notably, the judges adjudicating the case decided to impose harsher sentences than the ones proposed by the prosecutor with the latter also requesting the sentences be suspended for all the defendants. The judges are expected to rule shortly on the criminal treatment and the crucial issue of suspension for the five defendants.
The unraveling of the case
The case had international implications and was dubbed the largest stock market fraud in Greece’s recent history due to the unprecedented scale and duration of the manipulation that took place within the company. The case started to unravel with a bombshell report in 2018 from the American hedge fund QSM.
On May 4, 2018, American fund QSM released a damning report challenging the financial and commercial position of the group, with the head of QCM, Gabriel Grego, revealing the company operated fewer points of sale in Asia (Hong Kong) and the USA (289 points of sale were found compared to the 630 claimed), debunking the myth of the powerful Greek multinational with stores on the most famous streets in the world.
Despite the company categorically denying the hedge fund’s allegations, Folli-Follie’s stock went into a tailspin, eventually being suspended from trading on the stock market three weeks later. It is estimated that the company’s minority shareholders and bondholders lost approximately 1.5 billion euros.
The damning report from the consulting firm Alvarez & Marsal on the results of their investigations into the group’s companies in Asia caused a domino effect of developments in the Folli-Follie Group in September 2018.
Audits found that Folli–Follie’s company in China had for several years been presenting fictitious bank balances in legitimate bank accounts, as well as fictitious bank balances in non-existent fictitious bank accounts, and fabricating bank statements to substantiate these balances. The most striking example was the significant disparity between the group’s actual revenues in Asia, which amounted to 116,847,000 dollars, compared to the 1,112,000,000 dollars reported.
The court unanimously declined to suspend the sentences imposed on D. Koutsolioutsos, Tz. Koutsolioutsos, Aik. Begeti, and fugitive Ioannis Begetis.
The only defendant convicted and subsequently released was a Koutsolioutsos family’s associate, who was given restrictive conditions, including a travel ban, mandatory police station appearances and a bail of 10,000 euros.
The lawyer for Dimitris and Kaiti Koutsolioutsos requested that due to their age, they be allowed to serve their sentences under house arrest. This request was accepted, allowing the founder of Folli Follie and his wife to serve their sentences at home.
The prosecutor also supported house arrest for the two defendants. Only Tzortzis Koutsolioutsos will be sent to prison to serve his sentence until an appeal is heard.
