Siena prosecutors accused JPMorgan Chase & Co. and at least one of its employees of obstructing regulators as part of a wider probe into Banca Monte dei Paschi di Siena SpA’s purchase of Banca Antonveneta SpA.
Prosecutors allege an unidentified person at JPMorgan Securities Ltd., a unit of the New York-based bank, withheld information from regulators about a 1 billion-euro ($1.3 billion) financing arranged for Monte Paschi’s takeover of Antonveneta in 2008, a July 30 court filing obtained by Bloomberg News showed. The U.S. bank failed to oversee its employees properly, according to the filing.
JPMorgan arranged a sale of bonds exchangeable into shares of Monte Paschi to finance the deal. The lender, which benefited from the alleged crime by earning commissions, didn’t inform the Bank of Italy that it signed a so-called indemnity agreement with Monte Paschi, protecting JPMorgan from potential losses linked to the securities, according to prosecutors. By hiding the agreement, Monte Paschi was able to count the funding as equity instead of debt and boost capital.
The documents mark the final stage before the authorities can request formal indictments, and it brings them a step closer to reconstructing how Monte Paschi’s former managers allegedly colluded to misrepresent the lender’s finances in the years before it sought a government bailout.
Prosecutors also accused former Monte Paschi bankers, including former chairman Giuseppe Mussari, General Manager Antonio Vigni, of obstructing regulators as well as market manipulation and falsifying market filings, according to the filing. Ex-Chief Financial Officer Marco Morelli, now head of Bank of America Corp. in Italy, was also accused of obstruction.
JPMorgan said in a statement today that the bank and its employees acted correctly, and it will “vigorously” defend itself. No claim was ever made under the indemnity, it said. A Monte Paschi spokeswoman declined to comment.
Fabio Pisillo, Mussari’s lawyer, said in a statement that the allegations are without foundation and his client will outline his defense to the judges. Morelli and his lawyer Riccardo Olivo didn’t immediately return calls for comment. Enrico De Martino, a lawyer for Vigni, didn’t immediately answer calls.
Monte Paschi bought its Italian competitor from Banco Santander SA in 2008 for 9 billion euros, 36 percent more than what the Spanish lender paid for the Padua, Italy-based bank two months earlier.