Piedmont Says Official Signed Swap in Language He Couldn’t ReadKit Chellel and Elisa Martinuzzi
The official in the Italian region of Piedmont who signed interest-rate swaps with Dexia Crediop SpA and Intesa Sanpaolo SpA didn’t speak English well enough to understand the contracts, according to the region’s documents at a London court hearing.
Piedmont, which says it was wined and dined by the banks, signed swaps to cover its interest-rate exposure on a 1.8 billion euro ($2.3 billion) bond issue in 2006, and hasn’t made payments since January 2012, the two Italian banks said in court documents. Dexia and Intesa asked a U.K. court to order immediate repayment of about 36 million euros without the need for a trial.
The province argued the swap isn’t valid under Italian law and contained hidden profits for the banks. Its head of finance in 2006 “spoke very limited English such that he could not possibly have been expected to read and understand the complex agreements which he was executing,” it said in documents.
Italian local governments from Piedmont to the southernmost region of Sicily have lost money on derivatives they bought to adjust interest payments on borrowings. A judge in Milan in December convicted bankers and firms including Deutsche Bank AG, JPMorgan Chase & Co. and UBS AG of fraud over deals with hidden charges.
Spokesmen for Dexia and Intesa in Italy declined to immediately comment. Andrew Wass, a U.K. lawyer for Piedmont didn’t immediately respond to an e-mail seeking comment.
The banks paid for meals at Hotel Crillon in Paris and the two-Michelin star Sea Grill in Brussels to win the swaps contract, the region said in court documents. The officials relied on the banks’ advice, Piedmont said, asking the court to allow it to present its case at a full trial.
Piedmont has no chance of success and has “continued to fail to meet its obligations,” the banks’ lawyers said in court documents.
Piedmont settled a swap dispute with Bank of America Corp.’s Merrill Lynch last month on confidential terms.
The case is Dexia Crediop S.p.A. v. Regione Piemonte, High Court of Justice, Queen’s Bench Division Commercial Court