June 23, 2010 / 11:45 AM / 9 years ago

Greek parliament to probe 2007 bond issue scandal

* Probe of 280 mln euro govt bond issue backed by JP Morgan

* Inquiry part of crackdown on graft hitting state coffers

ATHENS, June 23 (Reuters) - Greek lawmakers have decided to investigate a bond scandal that helped topple the country’s previous conservative administration as part of a campaign to clean up politics soiled by decades of corruption.

Widespread corruption is seen to have contributed to a debt crisis gripping Greece. Hard-pressed by a new government austerity programme of tax increases and spending cuts to reduce debt, Greeks are demanding retribution for graft.

A parliamentary investigative committee will present its findings on October 4, according to records of a debate published on the parliament’s website after political parties unanimously agreed to the move late on Tuesday.

The probe will focus on a 280 million euro ($375.7 million) structured government bond issued in February 2007, underwritten by JP Morgan (JPM.N), that passed through several brokers before ending up with state-run pension funds at inflated prices.

Following published reports about the situation, the pension funds reached a deal with JP Morgan to have the transaction reversed and the investment bank bought back the bonds.

Several such structured notes, underwritten by other banks, had been sold to Greek pension funds.

“Setting up this committee is an act of responsibility, of transparency, and democracy. If we didn’t do it, we would bring the political system in disrepute,” said Christos Papoutsis, leader of the ruling Socialist Party’s parliamentary group.

Two other investigative committees are looking into a suspicious land swap deal with a Greek Orthodox monastery and into whether German engineering giant Siemens (SIEGn.DE) may have bribed and misled government officials to win deals, including the security contract for the 2004 Olympics.

There are parliamentary and judical investigations going on regarding Siemens, and a Greek prosecutor has filed charges in that case. Siemens says it is fully cooperating with Greek justice authorities and has not commented further.

Siemens ended one of the biggest corporate corruption investigations in history when it agreed in 2008 to pay about 1 billion euros in fines and penalties as a result of U.S. and German investigations into bribes paid to obtain contracts.

Prime Minister George Papandreou has said that parliament will also investigate how Greek finances deteriorated to the verge of bankruptcy, leading to a 110-billion-euro bailout by the European Union and the International Monetary Fund.

Investigative committees are the first part in a long parliamentary process that can ultimately lead to the trial of sitting or past government ministers by a special court.

However, Greece’s very restrictive statute of limitations for government ministers makes it hard to prosecute politicians for crimes committed before September 2007. (Reporting by Harry Papachristou; Editing by Ingrid Melander and Mark Heinrich)

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