Leading Cyprus businessman Aristodemou arrested for fraud

Cyprus authorities have arrested Theodoros Aristodemou, the island's leading property developer and former chairman of its largest bank, on conspiracy and fraud charges in an unprecedented move against a senior Cypriot businessman.

Mr Aristodemou is founder and chief executive of Aristo Developers, which owes more than €200m to Bank of Cyprus, the lender he chaired in the run-up to the island's financial collapse last year.

He failed to appear at a scheduled court hearing on Friday in the southern resort town of Paphos, where lawyers presented a medical certificate saying he had been rushed to hospital complaining of chest pains and was undergoing tests.

Mr Aristodemou, his wife Sotiroulla, an architect, and two Paphos municipal employees are accused of fraud, forgery and conspiracy in an alleged land scam involving a plan by Aristo to build holiday villas on a 3,000-square metre plot that had been zoned by the municipality as green space.

Mr Aristodemou has denied wrongdoing. He told local media last week that the municipality had "got their calculations wrong", adding that he was ready to co-operate with the investigation.

Other property developments by Aristo are also under scrutiny as part of a probe launched in July by the Cyprus attorney-general's office. Police recently raided the company's headquarters and seized computer disks and more than 150 project files.

Dozens of Cypriot bankers and members of the island's tight-knit business elite are being investigated as part of a broader official inquiry into the financial collapse, which resulted in a €10bn bailout from international lenders in which Cypriot depositors lost almost half their savings.

President Nicos Anastasiades has said "prosecutions will begin" by the end of this year.

Mr Aristodemou is the first big name to be arrested as a result of those investigations - an event that has sent shockwaves through the island's business community in light of his unique stature. His arrest signalled that a clique of business owners once considered immune to prosecution may now be vulnerable.

Along with other Cypriot developers and hoteliers, Aristo borrowed heavily from Bank of Cyprus during a real estate boom ahead of the island's entry to the euro in 2008, in which tens of thousands of holiday homes were sold, mainly to EU, Scandinavian and Russian buyers.

According to documents seen by the FT, the bank's 20 biggest borrowers together have more than €3bn of non-performing debt.

Aristo's own debt grew from €25m in 2006 to €200m in 2011 while Mr Aristodemou was serving on the bank's board and later as chairman, according to testimony by a Bank of Cyprus official to a parliamentary committee investigating last year's financial collapse.

Mr Aristodemou resigned suddenly in 2012, citing health reasons, when the bank decided to seek €675m in emergency state aid following heavy losses on its holdings of Greek sovereign bonds.

Aristo planned to pay off its bank debt by selling an integrated resort complex near Paphos, which includes an 18-hole golf course and luxury villas, to China Glory International Investments, a Hong Kong-based group. But the €290m deal fell through earlier this year, leaving Aristo struggling to resume sales of its villas to private investors.

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