Court Rejects Nomura Asset Seizure Amid Doubt on Paschi Fraud
An Italian appeals court rejected a request to seize assets from Nomura Holdings Inc. (8604), accused by prosecutors of colluding with some executives of Banca Monte dei Paschi di Siena SpA to hide losses.
Two former bank executives, who prosecutors claim were tricked by Nomura, and other former Paschi managers, knew of a connection between its 2009 restructuring of an investment that was losing money and the purchase of Italian bonds through Nomura, judges at the court in Siena wrote in their ruling.
Losses from derivatives prompted Monte Paschi to seek state aid of 4.1 billion euros ($5.4 billion) in February. Prosecutors had sought authorization to seize as much as 1.95 billion euros of Nomura assets, consisting mostly of funds pledged by Monte Paschi to Nomura as security for the derivatives contracts and deposited in Germany.
Judges cited at least one e-mail in which an allegedly hidden mandate agreement on the so-called Alexandria deal was mentioned, enabling the bankers to link the transactions and their objective.
The Bank of Italy was aware of the connection after an inspection of Monte Paschi that was completed in March 2012, eight months before the mandate agreement was allegedly found in a safe, the judges wrote in the 26-page ruling on July 13. In January, the Rome-based central bank said the true nature of the deals had come to light “only recently” after hidden documents were found.
Judges said there is “strong doubt” that Nomura committed fraud when it arranged the transaction and there’s no evidence of usury based on international market practice on repo and swap transactions. Still, Paschi should have booked a 220 million-euro net loss in 2009 that instead was hidden, the judges said. The appeal court ruling comes after three former Monte Paschi executives were charged last month with allegedly obstructing regulators by hiding the mandate agreement. They face trial starting in September.
A spokesman for Nomura declined to comment. Siena prosecutors declined to comment. An official for the Bank of Italy declined to comment.
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