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Italy Orders Seizure of $2.35 Billion in Siena Bank Inquiry Italy Orders Seizure of $2.35 Billion in Siena Bank Inquiry
(about 5 hours later)
FRANKFURT — Italian officials on Tuesday broadened their investigation into whether the Japanese investment bank Nomura helped hide losses at the troubled lender Monte dei Paschi di Siena, ordering the police to seize assets worth €1.8 billion ($2.35 billion) and naming a former top Nomura executive as a suspect. FRANKFURT — Italian officials on Tuesday broadened their investigation into whether the Japanese investment bank Nomura had helped hide losses at the troubled lender Monte dei Paschi di Siena by ordering the police to seize assets worth $2.35 billion.
The unusual move to seize such a large sum, and go after prominent bankers, underlined the importance of the case in Italy and the euro zone, where it has contributed to jitters about the country’s ability to rebuild the economy and survive the financial crisis. They also named Nomura’s former top European executive, Sadeq Sayeed, as a suspect. Mr. Sayeed, who retired in 2010, denied any wrongdoing and said he had not learned of the accusations until asked about them by reporters on Tuesday.
Prosecutors said the former head of Nomura in Europe, Sadeq Sayeed, was a target of the investigation. Mr. Sayeed, who retired in 2010, denied any wrongdoing and said he had not learned of the accusations until asked about them by reporters on Tuesday. Another senior Nomura executive, Raffaele Ricci, is also a target of the inquiry, prosecutors said. Mr. Ricci could not be reached for comment. Another senior Nomura executive, Raffaele Ricci, is also a target of the inquiry, prosecutors said. Mr. Ricci could not be reached for comment.
The new moves by Italian prosecutors also intensify the pressure on Nomura, and are a sign that the authorities are not letting up in their efforts to find out whether anyone bears criminal responsibility for transactions that left Monte dei Paschi in need of a €4 billion, or $5.25 billion, bailout by the Italian government and unable to fulfill its traditional role as benefactor to the community of Siena, a small Tuscan city. The unusual move to seize such a large sum, and go after prominent bankers, underlined the importance of the case in Italy and Europe, where it has contributed to anxiety about the country’s ability to rebuild its economy and survive the financial crisis.
The bank, founded more than five centuries ago, is the oldest in the world and the third-largest bank in Italy. A foundation that was the bank’s main shareholder used its share of profits to help pay for services like day care, ambulances and even the Palio, the bareback horse race that is the city’s trademark. By intensifying the pressure on Nomura, Italian prosecutors are signaling that they are not letting up in their efforts to find out who bears criminal responsibility for transactions that left Monte dei Paschi in need of a $5.25 billion bailout by the Italian government.
But the scandal surrounding the bank has reverberated well beyond the medieval streets of Siena and its 55,000 people. The bank’s problems, and the questions of who was to blame, played a role in the election campaign this year that left Italy so factionalized that a new national government has still not been formed. The lack of a strong government in Italy remains a risk to the euro zone. Meanwhile, the country’s struggling banks are unable to provide enough credit to support an economic recovery that Italy badly needs. The bank, founded more than five centuries ago, is the oldest in the world and the third-largest bank in Italy. It has served a traditional role as benefactor to Siena, a small Tuscan city. A foundation that was the bank’s main shareholder used its share of profits to help pay for services like day care, ambulances and even the Palio, the bareback horse race that is the picturesque city’s trademark.
But the scandal surrounding the bank has reverberated well beyond the medieval streets of Siena and its roughly 55,000 residents. The bank’s problems, and the questions of who was to blame, played a role in the election campaign this year that left Italy so factionalized that a new national government has still not been formed.
The lack of a strong government in Italy remains a risk to the euro zone. Furthermore, the country’s struggling banks are unable to provide enough credit to support an economic recovery that Italy badly needs.
Nomura has been sued by the new management of Monte dei Paschi for helping to design transactions that may have allowed previous managers at the bank to hide losses from regulators and shareholders.Nomura has been sued by the new management of Monte dei Paschi for helping to design transactions that may have allowed previous managers at the bank to hide losses from regulators and shareholders.
In a statement, Nomura said that no assets had been seized yet. “We will take all appropriate steps to protect our position and will vigorously contest any suggestions of wrongdoing in this matter,” the bank said, declining to elaborate further.In a statement, Nomura said that no assets had been seized yet. “We will take all appropriate steps to protect our position and will vigorously contest any suggestions of wrongdoing in this matter,” the bank said, declining to elaborate further.
The Siena prosecutor’s office said in a statement that most of the assets to be seized were collateral that Monte dei Paschi had posted with the Italian unit of Nomura in return for a loan. The operation was carried out by the Italian financial police in Siena, Rome, Milan and Bologna, as well as in the southern Italian city of Catanzaro, prosecutors said.The Siena prosecutor’s office said in a statement that most of the assets to be seized were collateral that Monte dei Paschi had posted with the Italian unit of Nomura in return for a loan. The operation was carried out by the Italian financial police in Siena, Rome, Milan and Bologna, as well as in the southern Italian city of Catanzaro, prosecutors said.
In addition, the authorities ordered the freezing of assets in accounts of three former executives of Monte dei Paschi who are also under investigation: €2.3 million from Giuseppe Mussari, former chairman of the bank; €9.9 million from Antonio Vigni, the former director general; and €2.2 million from Gianluca Baldassarri, the former chief financial officer. Mr. Baldassarri has been under arrest since February. In addition, the authorities ordered the freezing of assets in accounts of three former executives of Monte dei Paschi who are also under investigation: Giuseppe Mussari, former chairman of the bank; Antonio Vigni, a former chief executive; and Gianluca Baldassarri, the former chief financial officer. Mr. Baldassarri has been under arrest since February.
Prosecutors said Mr. Mussari, Mr. Vigni and Mr. Baldassarri were suspected of obstructing the functions of regulators and misrepresenting corporate assets, as well as other possible misdeeds. No formal charges have been filed against any of the people under investigation. Prosecutors said they suspect Mr. Mussari, Mr. Vigni and Mr. Baldassarri had obstructed the functions of regulators and misrepresented corporate assets, as well as other possible misdeeds. No formal charges have been filed against any of the people under investigation.
Italian news reports had previously mentioned Mr. Sayeed in connection with the case, but Tuesday marked the first time that prosecutors officially confirmed that he was a target of the investigation. Speaking by telephone from London on Tuesday, Mr. Sayeed said, “I completely and absolutely and vigorously deny any allegations,” which he said had “no basis in fact.” Speaking by telephone from London on Tuesday, Mr. Sayeed said, “I completely and absolutely and vigorously deny any allegations,” which he said had “no basis in fact.” Mr. Sayeed said he would not comment on individual transactions, but added that all transactions were carefully vetted and proper while he was head of Nomura in Europe.
A native of Pakistan, Mr. Sayeed said he had not been contacted by the Italian authorities or learned of the accusations until he started receiving telephone calls from reporters Tuesday. He said he would not comment on individual transactions, but added that all transactions were carefully vetted and proper while he was head of Nomura in Europe. Before he retired in 2010 as head of Nomura in Europe, the Middle East and Africa, Mr. Sayeed, 59, was credited with engineering the Japanese bank’s acquisition of the European assets of Lehman Brothers. The deal greatly expanded Nomura’s reach in Europe, but eventually proved costly.
Before he retired in 2010 as head of Nomura for Europe, the Middle East and Africa, Mr. Sayeed, 59, was credited with engineering the Japanese bank’s acquisition of the European assets of Lehman Brothers. The deal greatly expanded Nomura’s reach in Europe, but eventually proved costly.
Mr. Ricci, the other executive named in a statement by the Siena prosecutor Tuesday, has worked as a top executive in Nomura’s business involving bonds and other fixed-income products. Nomura would not comment on Mr. Ricci’s current status with the bank.Mr. Ricci, the other executive named in a statement by the Siena prosecutor Tuesday, has worked as a top executive in Nomura’s business involving bonds and other fixed-income products. Nomura would not comment on Mr. Ricci’s current status with the bank.
The lawsuit by Monte dei Paschi against Nomura, filed in March, relates to a transaction in 2009 known as Alexandria, which the Italian bank said was used to conceal losses from regulators and ultimately led to a €273.5 million loss.
Monte dei Paschi is also suing Deutsche Bank in connection with a transaction known as Santorini, which took place in December 2008 and later led to a loss of €305.2 million. Prosecutors said nothing about Deutsche Bank on Tuesday, and a spokesman for the bank said he was not aware of any new developments.
The complex transactions enabled Monte dei Paschi to transfer risk to the other banks, generating both profit and losses. But while Monte dei Paschi recorded the gains, it did not disclose all the losses.The complex transactions enabled Monte dei Paschi to transfer risk to the other banks, generating both profit and losses. But while Monte dei Paschi recorded the gains, it did not disclose all the losses.
The questionable transactions came to light after Fabrizio Viola, Monte dei Paschi’s new chief executive, in October found an exchange of letters with Nomura hidden in a safe. The bank consequently started a review of its financial portfolio, which led to a revision of its 2012 final results.The questionable transactions came to light after Fabrizio Viola, Monte dei Paschi’s new chief executive, in October found an exchange of letters with Nomura hidden in a safe. The bank consequently started a review of its financial portfolio, which led to a revision of its 2012 final results.
Monte dei Paschi said last month that it had a loss of nearly €3.2 billion last year, an improvement from the €4.7 billion it lost in 2011 but still worse than analysts had expected. Monte dei Paschi’s problems began in 2008, when it acquired a regional lender, Banca Antonveneta, for $11.7 billion, a sum that analysts at the time regarded as excessive. Short of cash, Monte dei Paschi then tried to raise money without compromising its capital base and concealed certain features of the transaction, according to the Bank of Italy, the country’s central bank. The Siena magistrates are now looking into allegations of bribery related to the Antonveneta deal.
Monte dei Paschi’s problems began in 2008, when it acquired a regional lender, Banca Antonveneta, for €9 billion, a sum that analysts at the time regarded as far too large. Short of cash, Monte dei Paschi then tried to raise money without compromising its capital base and concealed certain features of the transaction, according to the Bank of Italy, the country’s central bank. The Siena magistrates are now looking into allegations of bribery related to the Antonveneta deal.

Gaia Pianigiani reported from Rome.

Alessandro Profumo, Monte dei Paschi’s new chairman, and Mr. Viola, who took over as chief executive last year, are working to repair the bank’s finances and reputation. They have replaced executives, closed branches and announced the elimination of thousands of jobs. This article has been revised to reflect the following correction:
The bank had to ask for a government bailout because its troubles had left it short of the minimum capital requirement set by regulators.
Gaia Pianigiani reported from Rome.

This article has been revised to reflect the following correction:

Correction: April 16, 2013Correction: April 16, 2013

A headline with an earlier version of this article misstated the amount of assets seized from Nomura. It was $2.35 billion, not $1.8 billion.

A headline with an earlier version of this article misstated the amount of assets seized from Nomura. It was $2.35 billion, not $1.8 billion.