Ex-Deutsche Bank's Faissola, Foresti Accused in Paschi Case

  • Prosecutors complete inquiry into 4 separate transactions
  • Former Monte Paschi, Nomura executives also accused in probe

Milan prosecutors accused six former and current Deutsche Bank AG executives, including Michele Faissola, Michele Foresti and Ivor Dunbar, of colluding with Banca Monte dei Paschi di Siena SpA to falsify its accounts, manipulate the market and obstruct the activity of authorities.

Prosecutors completed an investigation into two separate derivative contracts arranged with Nomura Holdings Inc and Deutsche Bank, as well as on two financings dubbed FRESH and Chianti Classico, according to a Milan prosecutor office’s statement Thursday. The banks, five former managers of Monte Paschi, an ex-chief executive officer of Nomura International and another manager of Nomura at that time, are also accused.

Prosecutors have been reconstructing how Monte Paschi’s former managers misrepresented the lender’s finances in the years before it sought a government bailout. The misrepresentation first came to light in January 2013 when Bloomberg News reported that Monte Paschi used a transaction with Deutsche Bank, dubbed Santorini, to mask losses from an earlier derivative contract. The bank the same year had to restate its accounts.

The investigation revealed Monte Paschi arranged the transactions to hide losses that led to false accounting between 2008 and 2012, according to the prosecutor’s statement. The world’s oldest bank has since been forced to tap investors to replenish capital amid a slump in shares and rising bad loans and is now seeking a buyer to help restore profit.

The completion of the investigation may lead prosecutors to seek indictments after notification of the probe’s closing is made to the individuals and banks.

Foresti, Faissola

Spokesmen for Deutsche Bank, Monte Paschi and Nomura declined to comment. Dario Schiraldi, a senior executive in Deutsche Bank’s asset management business, who is also accused of the same wrongdoing, and a lawyer for Foresti and Dunbar, who was formerly co-head of global capital markets, also declined to comment. Dunbar didn’t immediately return calls seeking comment. Faissola, speaking by phone, said he “strongly denies” the allegations.

Prosecutors, who are preparing to file indictment requests, have alleged that Deutsche Bank’s bankers worked with Monte Paschi on the 2008 financing that hid losses from the lender’s accounts, a court document dated Wednesday and seen by Bloomberg shows. Deutsche Bank failed to oversee employees properly, according to the filing.

Faissola, whose roles included overseeing rates and commodities, was put in charge of Deutsche Bank’s combined asset and wealth management division in 2012 when Anshu Jain and Juergen Fitschen took over as co-chief executive officers of the Frankfurt-based lender. Deutsche Bank on Oct. 18 said Faissola would leave after a transition period.

Foresti joined Deutsche Bank in 1996 at its over-the-counter derivatives desk and rose to oversee rates and European credit flow trading at the company and left the firm for Bank of America Corp. in 2014.

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