Former UniCredit SpA Chief Executive Officer Alessandro Profumo is among 20 executives being examined in a tax-evasion probe that led a Milan court to seize 245 million euros ($337 million) of the bank’s assets, court documents show.
Prosecutors are examining whether UniCredit, Italy’s largest lender, committed fraud through an international investment plan dubbed Brontos arranged by Barclays Plc, according to the documents. Three people from London-based Barclays are also under investigation, the documents show.
UniCredit was “very surprised” by the seizure and “remains convinced that both it and its employees acted correctly,” the Milan-based lender said in a statement. The assets being held represent the firm’s suspected profit from false declarations for fiscal 2007 and 2008, according to a separate statement from Italy’s finance police, which conducted the seizure.
Profumo, 54, declined to comment on the inquiry as did Simon Eaton, a Barclays spokesman in London.
UniCredit used a tax plan named Brontos to increase the bank’s “economic benefits,” Profumo said at the company’s annual meeting in April 2010. The plan boosted the bank’s pretax profit, a UniCredit spokesman said at the time.
Brontos Tax Plan
Brontos was conceived to mask interest earned on a deposit account into dividends earned on fictitious securities, a judge wrote in his request for the asset seizure. Interest earned on deposits is taxed in full while dividends are taxed at 5 percent, the judge wrote.
Barclays used a Luxembourg unit to issue Turkish-lira securities that were purchased by its Milan branch, according to the judge. Through a series of transactions involving Barclays’s London branch and the use of currency swaps, Barclays enabled UniCredit to earn interest of about 20 percent in 2007, or five times the amount it could have earned on the interbank market at the time, according to the judge.
Vittorio Ogliengo, UniCredit’s co-head of financing and advisory, and Barclays bankers Rupak Chandra and Stefano Filippi are being examined, court documents show. Chandra declined to comment, while Ogliengo and Filippi didn’t immediately return a phone call and e-mail seeking comment. Barclays Capital “fully” supports its employees named in the probe, the company said in an e-mailed statement.
Barclays allegedly proposed the Brontos plan to UniCredit and Intesa Sanpaolo SpA, Italy’s second-biggest bank, Il Sole 24 Ore reported in 2009, citing a Barclays memo. Intesa, also based in Milan, didn’t participate in the deal, a spokesman for the bank was cited as saying at the time.
UniCredit, which used similar transactions in 2009 when it was already being examined, paid the correct amount of tax that fiscal year, the finance police said. Corriere della Sera reported details of the probe yesterday.
Profumo, a former McKinsey & Co. consultant, stepped down as CEO in September 2010, ending 13 years at the top of the bank. Profumo left after clashing with shareholders over Libyan investments in the bank and was replaced by Federico Ghizzoni.
Born in Genoa to a Sicilian family, Profumo took the lender’s top job in 1997 when it was known as Credito Italiano. He used the opening of the European markets brought about by the euro to transform the lender into UniCredit, a bank with operations from the U.S. to Kazakhstan. Under Profumo, UniCredit spent about $60 billion in takeovers from 2005 to 2008.
UniCredit’s shares have tumbled 39 percent this year amid investor concern that the European sovereign debt crisis could engulf Italy. Fitch Ratings is reviewing the firm’s credit rating, according to a statement last week.