Siena prosecutors will meet counterparts for Switzerland’s canton of Ticino tomorrow as they extend their probe of money laundering involving a former manager of Banca Monte dei Paschi di Siena SpA (BMPS), according to two people familiar with the investigation.
The probe may be broadened to include other individuals, said one person, who asked not to be identified because the investigation is private. Siena prosecutors declined to comment, while a spokesman for Ticino prosecutor Natalia Ferrara Micocci didn’t have an immediate comment.
Gianluca Baldassarri, a former finance chief for Monte Paschi, is being probed for money laundering in Switzerland and has built up assets in Italy and abroad disproportionate to his official income, estimated at 300,000 euros ($386,000), a Siena judge wrote in a March 17 arrest order obtained by Bloomberg News. There are “clues” that suggest Baldassarri transferred the proceeds of criminal activities through Swiss accounts, the judge wrote, citing a report from the Swiss authorities.
Baldassarri, deemed a flight risk, remains in custody after being arrested last month. Some of his assets were seized for obstructing regulatory activity and colluding with other managers to hide a document that showed how Monte Paschi used a derivative in 2009 to mask earlier losses, the court filing shows. Prosecutors in Siena are probing former Monte Paschi managers for false bookkeeping, market manipulation, criminal association and regulatory obstruction.
Baldassarri is also under investigation for fraud and criminal association for which about 20 million euros of his assets were seized, his lawyer, Filippo Dinacci, said by phone. He said he’s not aware of the Siena prosecutors’ meeting with Swiss authorities.
Baldassarri’s repatriation of “substantial” sums in 2009 and 2010 led to an investigation of the activities of Monte Paschi’s finance department and an inquiry into the bank’s use of complex financial transactions that had no apparent immediate or prospective profit, the court filing shows. One such deal with Nomura Holdings Inc. (8604), dubbed Alexandria, is at the center of the allegations against Baldassarri.
The banker allegedly hid a so-called mandate agreement on the trade dated July 31, 2009, that showed the intention to hide losses. The document was found on Oct. 10, the judge wrote.
In 2009, Baldassarri and other managers arranged a deal with Nomura whereby Monte Paschi bought Italian government bonds with a loan from the Japanese bank, swapped the fixed-rate interest payments on the bonds with a floating rate and guaranteed the credit risk on the bonds, in effect replicating the sale of credit-default swaps on the debt, according to the court filing.
The Nomura deal was struck at a loss for Monte Paschi and saw the Italian bank post as much as 2.2 billion euros in collateral in November 2011, when Italian sovereign bonds fell, the court filing shows. An official for Nomura declined to comment.
In a separate deal in December 2008, Monte Paschi borrowed 1.5 billion euros from Deutsche Bank AG (DBK) in a deal, called Project Santorini, that also masked earlier losses. Bloomberg News first reported on the Santorini transaction in January.
“The transaction was subject to our rigorous internal approval processes and also received the requisite approvals of the client who was independently advised,” Deutsche Bank said in a statement March 13.
Monte Paschi said in February that Santorini, Alexandria and a third transaction, Nota Italia, led to accounting errors that forced a lender to reduce net assets by 730.4 million euros at the end of 2012.
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