In Greece, the Banking Chief Draws Scrutiny. By LANDON THOMAS Jr.

Eirini Vourloumis for The New York Times

Georgios A. Provopoulos, the governor of the Bank of Greece, has played a crucial role in keeping Greece in the euro zone. 

ATHENS — In an era when central bankers like Ben S. Bernanke dominate the global economic stage, few hold as much power within their own country as Georgios A. Provopoulos, the governor of the Bank of Greece, who has played a crucial role in keeping Greece out of bankruptcy and in the euro zone.

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Eirini Vourloumis for The New York Times

“My actions will be judged in the future after the dust has settled and people are in a better position to assess the results.”
GEORGIOS A. PROVOPOULOS, governor of the Bank of Greece

But now Mr. Provopoulos faces one of the bigger challenges of his tumultuous reign: an investigation into whether he abused his position by clearing a banking deal involving his former employer and a business magnate who was subsequently charged with embezzlement and fraud.

In a confidential report issued last May, a senior Greek prosecutor said that Mr. Provopoulos approved the 71 million euro ($96 million) deal despite warnings from his staff regarding the buyer’s finances. The report, parts of which were reviewed by The New York Times, hints at the scope of the investigation, about which little has been previously disclosed.

There is no evidence that Mr. Provopoulos profited personally from the transaction, which was ultimately approved. But his role — and the chance, however remote, that he might face criminal charges — could have ramifications beyond Greece. Other countries in the euro zone have invested more than 40 billion euros to shore up the Greek banking system. In the process, they have pressed Athens to clean up the corruption

and crony capitalism that have been at the root of the country’s problems.

According to the report, Mr. Provopoulos allowed the businessman, Lavrentis Lavrentiadis, to enter into a deal with Mr. Provopoulos’s former employer, Piraeus Bank, at a vastly inflated price. The transaction enabled Mr. Lavrentiadis to gain control of another bank, Proton, and, in the process, benefited Piraeus, which was struggling.

The dossier cites a number of red flags that banking supervisors raised about Mr. Lavrentiadis, including excessive debt and suspicions of money laundering. Last December, he was charged with embezzling from Proton to prop up his other interests. He is being held in prison pending trial and has denied the charges.

Proton Bank had to be bailed out by the Greek government, at a cost of 1.3 billion euros.

The deputy prosecutor at the time, George Kaloudis, argued in his report that there were enough questions concerning the transaction to warrant further investigation of the central bank’s handling of the affair. Mr. Kaloudis, who is no longer in his position, declined to comment.

Mr. Provopoulos, in an interview, said all of his actions were taken to prevent the Greek financial system from imploding and that the central bank’s board unanimously approved the Proton deal. He added that Mr. Lavrentiadis had a 20-year record as a successful entrepreneur and had promised to make the bank a more conservative institution.

“He was ready to inject additional capital in the bank, and he satisfied all formal and legal requirements,” Mr. Provopoulos said. He pointed out that Mr. Lavrentiadis was ultimately arrested and charged based on evidence provided by the central bank.

The controversy over Mr. Provopoulos and the Greek bank bailouts echoes the public discontent over the taxpayer-financed rescues of large American banks during the financial crisis that began in 2008. Five years ago, Henry M. Paulson Jr., the former Goldman Sachs chief who was then Treasury secretary, and others with ties to Wall Street orchestrated those bailouts, prompting a public outcry.

In Greece, Mr. Provopoulos fast-tracked a slate of deals that transformed Piraeus Bank, where he had been a vice chairman before joining the central bank, into the nation’s most powerful bank.  The legal saga is also a visible sign of a behind-the-scenes power struggle between Mr. Provopoulos and the government of Prime Minister Antonis Samaras over control of the country’s banks, which for decades have been a source of patronage and influence in Greece.

Whether prosecutors will formally charge Mr. Provopoulos is unclear. Mr. Lavrentiadis’s lawyers have argued that their client’s case and that of Mr. Provopoulos must be investigated together, as Mr. Kaloudis suggested in his report.

Pavlos Zafiropoulos contributed reporting.
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