Financial empire collapses after activist cries foul

Corporate governance activist Pieter Lakeman of the Mortgage Grievances Foundation urged customers on national media to withdraw money from DSB after allegations it overcharged mortgage holders. Consumers took out 15 percent of the bank's deposits in two weeks, causing the Dutch central bank to seize control on Monday.

"It has never been unclear who wielded the sceptre at DSB," said Harald Benink, a professor of banking and finance at Tilburg University. "If one person has too much power and wears too many hats, then normal business criteria can come under pressure."

The collapse of Scheringa's bank has caused turmoil in the northwest Netherlands. Most of the Wognum-based lender's employees work in the region, clients can't access accounts, and Alkmaar-based AZ may need a new sponsor.

Locals, who witnessed the government nationalising the Dutch assets of ABN Amro and Fortis last year, are angry about the way Scheringa has been treated.



Growing pains

"I think he grew too fast and threatened to become a new rival to all the other banks, which did get state support," said Frank Schoutsen, a Wognum baker who sells sandwiches to DSB staff. "The way they tackled him was rude. They never gave him a chance to right things."

Scheringa hung out his shingle as a tax adviser in 1975 after helping friends and family file their returns. The banker worked out of a converted monastery for 15 years as he became a broker for consumer loans. In the 1990s he expanded into selling insurance and mortgages. DSB Bank was founded in 2000, although it only got a full banking licence in 2005.

"It's very unjust that this has happened," Scheringa told RTL television after the run on DSB. His spokesman told Bloomberg he was unable to comment further.

DSB customers withdrew more than e600 million (R6.5 billion) after the October 1 call to action on national television show Goedemorgen Nederland by Lakeman, a fraud expert who has waged battles against firms including telecoms giant Royal KPN. The run left DSB with e3.5bn of deposits.

"Such an appeal is outrageous," said Gert Jochems, a former employee of the Dutch securities regulator who now runs consulting firm Financial Markets Conduct. "As far as I'm concerned, Lakeman and his foundation can be held jointly liable" if DSB account holders lose money.

Lakeman says DSB failed to adequately inform borrowers about mortgage risks and charged excessive commissions. He told viewers that if DSB went bankrupt, mortgage holders would be treated more fairly by administrators than by DSB.


"A bankruptcy would have come anyway, I merely sped it up," Lakeman said. "That is favourable for everybody, also for the savers, as DSB has been losing money and this stopped the losses."

While Dutch bank accounts are guaranteed for as much as e100 000 a person, the more than 350 000 DSB account holders will not be able to withdraw money until a central bank plan to refund their cash takes effect. When customers tried to use DSB bank machines on Tuesday in Wognum, the screens read simply: "Technical Failure."

Lakeman wasn't the first to raise alarms about DSB. The financial regulator AFM in May fined the bank e120 000 for awarding mortgages to clients who might not be able to repay them. The bank said in July it planned to appeal.

Dutch business magazine Quote estimated that Scheringa's worth dropped 61 percent to e285m last year because of declining profitability that forced him to pump money into the bank. The drop was the second-steepest on a list of the 500 wealthiest Dutch people.



Blowing the whistle

"This is an individual, relatively small bank that came into trouble through its own management, clients that walked away, unclear communications and all the uncertainty that resulted from that," Finance Minister Wouter Bos said at a news conference last week.

Scheringa offered his apologies in an October 3 statement.

"A number of customers are angry with DSB Bank about loans and single-premium insurance policies and a number of them are right," he said. "I assure you I'll solve their complaints as soon as possible."

On Monday central bank president Nout Wellink criticised Lakeman's campaign against DSB.

"If you fundamentally undermine confidence in such an institution then that involves great risks."

Scheringa became a local hero after he bought AZ in 2005 and this year brought the national soccer title to Alkmaar, a city of 94 000 people better known for its cheese market, for the first time since 1981. The banker also sponsors a skating team.

In addition, he brought jobs and visitors to the region, building the Scheringa Museum of Realist Art.

His neighbours aren't turning their backs on Scheringa.

"They were out to get Scheringa, and Lakeman is most guilty," said Annemarie Stam, who owns a party centre in Wognum. "The DSB Bank certainly wasn't the best bank, but they were trying to improve things." - Bloomberg