MILAN (Reuters) - Milan prosecutors are requesting that troubled lender Monte dei Paschi di Siena and Japanese bank Nomura be sent to trial in Italy over a 2009 derivative trade, judicial sources said.
The trade, known as Alexandria, is at the heart of a scandal that rocked Monte dei Paschi in 2012 just as it was being hit hard by the euro zone debt crisis.
The bank emerged as the weakest lender in a Europe-wide review of lenders last year and has been told by the European Central Bank to close the Alexandria trade because its exposure to Nomura breaches regulatory limits.
Under Italian law, a company can be held responsible if it is deemed that it failed to prevent, or attempt to prevent, a crime by an employee that benefited the company. Nomura has previously denied any wrongdoing in the case, while Monte dei Paschi is seeking damages from its former employees and from Nomura in a civil lawsuit.
The sources said prosecutors also want to put five individuals on trial over allegations of false accounting and market manipulation. They are Monte dei Paschi’s former chairman Giuseppe Mussari, former CEO Antonio Vigni and former finance chief Gianluca Baldassarri, Nomura’s former chief in Europe, Sadeq Sayeed, and its managing director in fixed income sales for Europe, Middle East and Africa, Raffaele Ricci.
Ricci’s lawyer declined to comment. The lawyers of Mussari, Vigni, Baldassarri and Sayeed did not respond to emails seeking comment.
A judge will have to decide whether to accept the prosecutors’ request. No one will be formally charged in the case unless the judge does send them to trial.
The underlying asset in the Alexandria trade is 3 billion euros of Italian BTP government bonds maturing in 2034.
According to judicial documents seen by Reuters, the prosecutors allege that Monte dei Paschi misrepresented Alexandria in its 2009 accounts, concealing a loss linked to the contract of at least 308 million euros ($333 million).
They allege that false information was given to the market because Monte dei Paschi reported an overall profit for that year when it should have posted a loss of 264.5 million euros.
Monte dei Paschi said earlier this month that the ECB had told it to close the Alexandria trade by July 26 because its exposure to Nomura, at around 3.4 billion euros, stood at nearly 35 percent of its regulatory capital. That is 10 percentage points more than the level allowed.
The bank, which is about to launch a 3-billion-euro capital increase to plug a shortfall revealed by the European tests last year, has said in a letter to prosecutors seen by Reuters that closing the Alexandria trade unilaterally would generate a pre-tax loss of 1 billion euros. It later said terminating Alexandria would have almost no impact on its core capital.
Mussari, Vigni and Baldassarri were last year sentenced to jail by a Siena court for misleading Italian regulators in relation to the Alexandria trade but will not serve any sentence until the appeals process is exhausted.
Additional reporting by Ilaria Polleschi; Editing by Mark Trevelyan
Our Standards: The Thomson Reuters Trust Principles.