By Massimo Gaia
MILAN, April 18 (Reuters) - Italian tax police descended on the Milan offices of JP Morgan on Thursday in search of documents in their investigation into suspected fraud at Monte dei Paschi bank, as a scandal rocking Italian finance spreads to foreign banks doing business there.
The arrival of police at the central Milan office of the U.S. bank comes two days after Italian prosecutors moved to seize up to 1.95 billion euros ($2.54 billion) from Nomura, Japan’s largest broker.
“The tax police are here to acquire documents and we are handing them over to them,” Giorgio Perroni, a lawyer for the U.S. investment bank, told reporters. JP Morgan has repeatedly denied any wrongdoing, and a source close to the investigation said the U.S. bank was not itself under investigation.
“They have given the documents that were asked for, they are cooperating,” the source said.
JP Morgan helped Banca Monte dei Paschi di Siena to finance its 9 billion euro purchase in 2007 of rival Antonveneta bank through a 1 billion euro hybrid bond.
JP Morgan is also one of the foreign banks, along with Nomura and Deutsche Bank, that entered into derivatives deals that imposed huge losses on Monte dei Paschi after the Antonveneta deal. Nomura and Deutsche also deny wrongdoing.
Italian authorities say Monte dei Paschi was brought to the verge of collapse by overpaying for Antonveneta and making bad trades with foreign banks, in deals that were often hidden from regulators and intended to camouflage losses.
Prosecutors are investigating whether the missteps, which forced the Italian state to bail out the 500-year-old bank with a 4 billion euro ($5.2 billion) loan, were the result of fraud or kickbacks paid under former Monte dei Paschi management.
Two investigative sources told Reuters on Thursday that Siena prosecutors had asked tax police to visit JP Morgan’s offices in central Milan to seek documents relating to Monte dei Paschi’s acquisition of Antonveneta.
Italy is seeking the help of other European countries to carry out its seizure of cash from Nomura, held in accounts with other banks in Frankfurt and London.
Prosecutors say their goal is to block Monte dei Paschi from losing more money to the Japanese broker over a deal called “Alexandria”, a bet on Italian government bonds made more costly by an interest rate swap unfavourable when rates fell.
Monte dei Paschi has posted losses of 730 million euros from bad derivatives deals including Nomura’s Alexandria, a similarly large trade called Santorini made with Deutsche bank and, to a lesser extent, another called Nota Italia with JP Morgan.
A source told Reuters this week that prosecutors could consider action against Deutsche Bank similar to the steps taken against Nomura, but that the investigation into the Santorini deal was not yet as advanced as the probe into Alexandria.
Flavio Valeri, the head of Deutsche Bank in Italy, told Reuters on Thursday that the German bank had not been informed of any possible proceedings against it by the Siena prosecutors.
The prosecutors’ seizure order against Nomura described the Santorini and Alexandria deals as twins. However, a banking source with knowledge of the matter said Italian authorities were differentiating between the two deals.
“Deutsche Bank does not expect anything similar (to the seizure order against Nomura) and is not preparing for such a case,” the banking source said.