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October 3, 2013 3:04 pm
Prosecutors in Siena have asked a judge to force JPMorgan Chase to stand trial for obstructing regulators as part of a wider probe into Italy’s scandal-mired Monte dei Paschi di Siena and its buyout in 2008 of regional rival Antonveneta.
The allegation is the latest following a wide-ranging series of criminal charges filed by the prosecutors against the Italian group’s former managers. Monte dei Paschi, Italy’s third-largest bank by assets, is being kept alive by €4.1bn in government bailout bonds, its third state rescue in four years.
The prosecutors also are pursuing a trial for the bank’s former managers for allegedly obstructing regulators, market manipulation and fraud related to the Antonveneta deal. They deny wrongdoing. It is now up to the judge to decide whether to approve criminal trials. The date for a decision is not yet fixed.
The prosecutors allege JPMorgan withheld information from regulators about a €1bn financing structure, known as an indemnity, that the bank arranged for MPS ahead of its €9bn takeover of Antonveneta, said people with direct knowledge of the matter.
JPMorgan said in a statement: “No claim was ever made under this indemnity (which only existed for a matter of days) . . . for the benefit of JPMorgan or any of its employees. We believe that JPMorgan and its employees acted correctly at all times. We will defend this action vigorously.”
If the case goes to trial, it will be another legal headache for the US universal bank, which recently paid nearly $1bn in fines in connection with its London whale trading fiasco and is being pressured to pay another $11bn in penalties and customer aid to settle allegations it mis-sold mortgage-backed securities.
MPS has been embroiled in a scandal that erupted 18 months ago when it was alleged that hidden derivatives deals were used to cover up losses, and allegations surfaced of bribery and backhanders by former management. Former managers are under arrest and police are also investigating the suicide of the bank’s former head of communications.
MPS has launched legal proceedings in Italy against Nomura, and prosecutors are also investigating the Japanese bank over complex derivatives agreements, which allegedly were used by former management to flatter the bank’s accounts after the Antonveneta buyout and hide the impact of the deal from shareholders.
Nomura, which has denied wrongdoing, has launched a claim against MPS in London asking the High Court for a series of court declarations that each of the disputed agreements are valid.
Under pressure from regulators MPS, which was founded in 1472 and considers itself the world’s oldest bank, is being forced to undertake a €2.5bn capital increase, close extra branches and cut the salaries of its top managers.
Analysts widely expect the bank will fail to find sufficient private backers for the capital increase – partly because it remains mired in lawsuits – and expect the Italian government will be forced to take it over next year.
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