Monte Paschi struck secret deal over Antonveneta: police

Fri Feb 8, 2013 5:49pm EST
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By Silvia Aloisi, Stefano Bernabei and Silvia Ognibene

SIENA, Italy (Reuters) - Monte dei Paschi struck a last-minute, secret deal with Bank of New York that allowed the Italian bank to mislead authorities and smoothed through its acquisition of rival Antonveneta, according to a report by the financial police in Italy.

A deepening fraud and bribery scandal at the country's third largest bank has caused a political outcry ahead of a parliamentary election on February 24-25, with the Bank of Italy under fire over suspected financial irregularities at the Tuscan institution.

Monte dei Paschi's 9-billion euro purchase of Antonveneta in 2008 precipitated an eventual state bailout and prosecutors in its home city of Siena are probing whether it deliberately overpaid and whether bribery was involved.

Monte dei Paschi's current management have said they have found no evidence of bribery.

In a report by Italy's financial police provided to prosecutors for their investigation and reviewed by Reuters, the police say that Monte dei Paschi granted Bank of New York an indemnity in return for investor approval to change the terms of a 1-billion euro hybrid financial instrument.

It did not disclose the indemnity to the Bank of Italy.

The Bank of New York did not want to be liable for coupon payments if some of the noteholders refused to agree to the change in the terms of the notes.

There is no suggestion in the police documents of any wrongdoing on the part of Bank of New York. But the success of Monte dei Paschi's bid for Antonveneta rested partly on the deal, known as FRESH 2008, raising the money it needed to acquire Antonveneta.   Continued...

People are reflected in the window of a Monte Dei Paschi Di Siena bank in Rome January 29, 2013. REUTERS/Max Rossi