Executives Convicted in Long-Running Italian Banking Scandal

Date : 11/08/2019 @ 8:24PM
Source : Dow Jones News
Stock : Deutsche Bank AG (DBK)
Quote : 6.525  0.078 (1.21%) @ 4:35PM

Executives Convicted in Long-Running Italian Banking Scandal

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By Giovanni Legorano and Jenny Strasburg 

A Milan court on Friday convicted 13 former and current executives of Banca Monte dei Paschi di Siena SpA, Deutsche Bank AG and Nomura International PLC of a number financial crimes, in a long-running judicial saga tied to losses at the troubled Italian bank.

The court gave the bankers suspended jail sentences of up to seven years and six months each, according to a court document seen by The Wall Street Journal.

The court also ordered the seizure of about EUR65 million ($71 million) from Deutsche Bank and EUR88 million from Nomura plus a EUR3 million fine for Deutsche Bank and EUR3.5 million for Nomura.

Giuseppe Iannaccone, a lawyer for the Deutsche Bank former and current managers, said he "couldn't hide his shock for this verdict" and is fully confident the managers are innocent. Mr. Iannaccone said the defendants will appeal the verdict.

"We are disappointed with the verdict. We will review the rationale for it once it is published," a Deutsche Bank spokesman said. A Nomura spokesman said the bank "is disappointed with the verdict delivered by the Court. After thoroughly examining the content of the judgment, the Company will consider all options, including an appeal. The penalties will not be enforceable until all appeals have been concluded."

An appeal could prolong the case another two to three years, according to people involved,

The decision follows a three-year trial and an investigation lasting more than 1 1/2 years by Milan prosecutors into two complex financial transactions that Monte dei Paschi arranged in 2008 and 2009 with Nomura and Deutsche Bank, as well as other transactions that prosecutors said had helped the Tuscan bank misrepresent its financial health during and after the financial crisis.

Deutsche Bank and Nomura were also defendants in the trial, since, according to Italian law, companies can be charged with a direct liability for some crimes committed by their representatives. Monte dei Paschi reached a plea-bargain agreement with the court in 2016.

The executives were charged in October 2016 after Milan prosecutors said they had found evidence of the manipulation of Monte dei Paschi's stock and falsification of its accounting, and some of the executives' obstruction of the supervisory activity of Italian authorities.

Prosecutors accused the executives of collusion to design and carry out two complex derivatives trades, dubbed Santorini and Alexandria, which the prosecutors said helped Monte dei Paschi hide mounting losses.

In particular, prosecutors alleged Monte dei Paschi's accounting was false between 2008 and 2012, with the bank's actual earnings being as much as 88% lower than what it disclosed during that time.

After many attempts to keep Monte dei Paschi -- the world's oldest bank -- afloat both with private and public money, Italy's Economy Ministry stepped in to nationalize it at the end of 2016, a few months after the trial started.

The bank, which had been a perennial trouble spot in Europe's most troubled banking system, has since made significant progress in cleaning up its balance sheet and returning to profitability, after years of multibillion-dollar losses. During those years the bank was hit by mounting bad loans, the legal scandal related to the derivative transactions that hurt its reputation and a costly, ill-fated acquisition of a rival Italian bank.

Convicted former managers at Monte dei Paschi include ex-chairman Giuseppe Mussari, who was given a jail sentence of seven years and six months, the longest.

"This incredible verdict will vanish, because Mr. Mussari is innocent," Mr. Mussari's lawyers said in a statement.

The most senior of the ex-Deutsche Bank defendants, Michele Faissola, oversaw interest-rate and commodities trading in the bank's markets division, then ran its combined global asset- and wealth-management business. He left in late 2015 during a high-level management shake-up.

Mr. Faissola since has advised members of Qatar's royal family on investments including their large shareholding in Deutsche Bank. That role has put him at the nexus of shareholder discussions with the struggling bank related to capital-raisings, investor representation on the supervisory board and management performance during several major restructurings.

Michele Foresti was a fixed-income trading executive who left Deutsche Bank in 2014. Dario Schiraldi left the bank in 2016 after working in various asset-management sales roles. A former equity analyst, Marco Veroni oversaw client accounts for Deutsche Bank including dealings with Monte dei Paschi during the period in focus. He left in 2012.

Matteo Vaghi still works for Deutsche Bank in wealth management in London.

Former global-markets executive Ivor Dunbar, Mr. Faissola and Mr. Foresti were sentenced to four years and eight months each in jail. Mr. Schiraldi, Mr. Veroni and Mr. Vaghi were sentenced to three years and six months each in jail. The individuals who responded to requests for comment referred to the lawyer's statement made on their behalf.

Sadeq Sayeed, who had been in charge of Nomura's Europe, Middle East and Africa region and left the bank in 2010, was sentenced to four years and eight months in jail. He couldn't immediately be reached for comment.

Francesca Chiarano

in Milan contributed to this article.

Write to Giovanni Legorano at giovanni.legorano@wsj.com and Jenny Strasburg at jenny.strasburg@wsj.com

 

(END) Dow Jones Newswires

November 08, 2019 15:09 ET (20:09 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.


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