JP Morgan under investigation in Monte Paschi probe: document

Wed Jul 31, 2013 10:08am EDT
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By Silvia Ognibene and Silvia Aloisi

SIENA/MILAN (Reuters) - Italian prosecutors probing Monte dei Paschi's 2007 acquisition of a smaller rival are investigating U.S. investment bank JP Morgan over an alleged crime committed by one of its employees, according to a prosecutors' document.

The document, seen by Reuters, said the alleged crime was the obstruction of Italian regulators by an unknown JP Morgan employee relating to a 1 billion euro ($1.3 billion) hybrid financial instrument used to partly fund Monte dei Paschi's purchase of Antonveneta.

JP Morgan denied any wrongdoing and said it would defend itself vigorously. "We believe that JP Morgan and its employees acted correctly at all times," it said in an emailed statement.

Monte dei Paschi is also under investigation in the probe for a range of alleged crimes including market manipulation and making false statements to the market, as are its former chairman Giuseppe Mussari, its former director general Antonio Vigni and seven other former bank employees.

Under Italy's 231 law, a company can be held responsible if it is deemed that it failed to prevent, or attempted to prevent, a crime by an employee that benefited the company.

In the document, Italian prosecutors allege the JP Morgan employee failed to inform the Bank of Italy of a deal which they say violated requirements set by the central bank over the hybrid instrument, known as FRESH 2008.

They allege the unknown employee had "a representative, administrative and management role" at the U.S. bank.

The document, which wraps up a preliminary investigation started in October 2011 and was sent to all the parties involved, says the alleged crime was committed "in the interest and to the benefit of JP Morgan".   Continued...

JPMorgan Chase & Co's international headquarters are seen on Park Avenue in New York July 13, 2012. REUTERS/Andrew Burton