Italy police seize 220 mln euro derivative contracts

BARI, Italy Jan 13 (Reuters) - Italian tax police said on Friday they had seized derivative contracts worth more than 220 million euros ($282 million) as they probe allegations of fraud against officials at two Italian banks.

This is the latest case in a growing number of investigations by Italian authorities into complex derivatives deals which local governments and small companies have challenged in court, saying they have been misled.

The Molfetta tax police, in southern Italy, said more than 60 bank managers at Banca Monte dei Paschi di Siena and Banco di Napoli, a unit of Italian bank Intesa Sanpaolo , had been placed under investigation.

"Banks generally induced their corporate clients to subscribe to the derivative contracts by ... wrongfully depicting the financial product," police said. "The fraudulent mechanism has worsened the financial position of companies that bought the derivatives."

Intesa and Monte Paschi were not immediately available for a comment.

The police said that Banco di Napoli was seeking a settlement with its clients over the matter.

The police also seized 4 million euros which they said were the profits the banks reaped from the contracts. They seized a further 6 million euros representing expected cash flows from the contracts. ($1 = 0.7814 euros) (Reporting By Elisa Forte)