Italy took a hard line against bankers involved in helping Banca Monte dei Paschi di Siena SpA falsify its accounts, sentencing 13 executives to jail and fining the firms involved as it seeks to draw a line under one of the country’s biggest financial scandals.
Monte Paschi ex-Chairman Giuseppe Mussari was sentenced to more than 7 years in prison. Former Deutsche Bank officials Michele Faissola and Michele Foresti got sentences of 4 years and 8 months and Dario Schiraldi was given a term of 3 years and 6 months. Nomura’s Sadeq Sayeed and Raffaele Ricci got prison terms of 4 years 8 months and 3 years 5 months respectively. The court also handed down financial penalties and asset seizures totaling about 160 million euros ($176 million) against Deutsche Bank and Nomura.
Monte Paschi’s managers were accused of colluding with Deutsche Bank and Nomura bankers to hide losses at the Italian lender by using complex derivatives trades, dubbed Santorini and Alexandria, that led to a misrepresentation of its finances between 2008 and 2012. Paschi reached a plea-bargain deal in 2016 in one of the highest profile European banking cases in the last decade, first revealed by Bloomberg News.
A spokesman for Monte Paschi declined to comment. Deutsche Bank said it’s disappointed in the ruling and will review the rationale of the verdict once made public. Nomura wasn’t immediately available to comment through an external spokeswoman.
All of the 11 suspects from the three banks received prison terms, including Antonio Vigni, Monte Paschi’s former general manager and ex-CFO Daniele Prondini were convicted. The court also convicted two managers for whom the prosecution had called for acquittal.
Prosecutors argued that the complex transaction Deutsche Bank helped put in place in 2008 hid about 430 million euros of losses that Paschi was facing on a previous deal, while Nomura’s derivative hid more than 300 million euros of losses not reported in the bank’s 2009 income statement. While the punishments handed down were tough, there is the chance for the convictions to be appealed.
Both transactions were carried out to cancel previous losses by building up two-leg deals, with one leg granting Monte Paschi an immediate gain and the other loss-making one designed to last for several years in order to pay back the investment banks for the gains realized by Paschi on the first one, according to prosecutors.
Giuseppe Iannaccone, the lawyer defending former Deutsche Bank executives in Monte Paschi case, said in a statement that he’s “shocked” by the ruling and fully convinced of his clients’ innocence.