Police Seize $140 Million From Nomura in Sicily Fraud CaseSonia Sirletti
Police in Italy seized 104 million euros ($140 million) in property and cash as part of a probe into allegations that Nomura Holding Inc. used complex financial products to defraud the regional government of Sicily in the years leading up to the financial crisis.
Japan’s biggest brokerage is accused of carrying out derivatives trades from 2000 to 2006 that cost the Mediteranean island about 175 million euros, police said in an e-mailed statement today. Four Nomura employees at the time are under investigation, along with three other people, said police Colonel Francesco Mazzotta. He didn’t identify the suspects.
Nomura said in an e-mailed statement that it was reviewing the situation and will cooperate with prosecutors. The four bankers under investigation no longer work for Nomura, a London-based spokesman said by phone when contacted by Bloomberg.
Municipalities from Detroit to Naples lost money on derivatives in the years before the U.S. subprime implosion threw a spotlight on the risks hidden in the securities. Instead of lowering their borrowing costs as hoped, the trades left them deeper in debt.
Italian local governments have sought to recoup their losses through legal action at home and in the U.K. In March, JPMorgan Chase & Co., Deutsche Bank AG, UBS AG and Depfa Bank Plc won a bid to overturn a Italian court conviction for overseeing fraud by their bankers in the sale of derivatives to the city of Milan.
Italy’s financial police seized bank accounts and credit valued at 98 million euros from Nomura, along with 6 million euros in property, shares and cash belonging to the seven suspects. The amount represents the profit the bank allegedly made from the trades, police said.
Nomura created three derivatives contracts to restructure Sicily’s debt that wound up costing the region 60 million euros, police said. Sicily also lost 115 million euros on the securitization, or bundling, of health-care debt in 2002 at an “onerous” interest rate, police said.
Italy’s local authorities had 26.9 billion euros in derivatives contracts at the end of 2008, when Italy prohibited new transactions, the Bank of Italy said in an annual report in May. The central bank said the nominal value of such contracts was 9.8 billion euros as of March.