CORRECTED-Monte Paschi lied about terms of Fresh 2008-prosecutors allege

Wed Feb 6, 2013 1:50pm EST

(Clarifies source of allegations)

SIENA, Italy Feb 6 (Reuters) - Monte dei Paschi lied to the Bank of Italy about the terms of the so-called FRESH 2008 hybrid instrument, worth around 1 billion euros, which it used to partly fund its acquisition of Antonveneta, prosecutors alleged in a document obtained by Reuters on Wednesday.

In the document, prosecutors alleged that Monte dei Paschi's then chief financial officer Marco Morelli had signed an indemnity document in favour of J.P. Morgan which was hidden from the regulator. J.P. Morgan in 2008 underwrote a 1 billion euro capital increase in Monte dei Paschi, and then structured the Fresh 2008 hybrid instrument, convertible in Monte dei Paschi's shares, and sold it to a number of investors.

J.P. Morgan in Milan declined to comment.

Prosecutors alleged in the document that Morelli also gave a so-called indemnity side letter to Bank of New York, which acted as an intermediary in the FRESH 2008 deal, "at the time of a meeting of the FRESH investors", which the prosecutors said was also hidden from the regulator.

Prosecutors alleged that the indemnity side letter violated requirements set by the Bank of Italy by making the FRESH 2008 work like a bond rather than an hybrid equity instrument. (Reporting By Silvia Ognibene, writing by Silvia Aloisi; Editing by Alexander Smith)

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