SIENA, Italy Monte dei Paschi (BMPS.MI) 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, a judicial document showed on Wednesday.
The document, obtained by Reuters, said Monte dei Paschi's then chief financial officer Marco Morelli had signed an indemnity document in favor 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.
According to the prosecutors' document, 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 was also hidden from the regulator.
Prosecutors suspect 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 Lisa Jucca)