Monte Paschi former finance chief held in Italy

Thu Feb 14, 2013 7:51am EST
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By Silvia Ognibene Manuela D'Alessandro

SIENA/MILAN (Reuters) - Italian police arrested on Thursday the former head of Monte dei Paschi's finance department, who is at the center of a probe into alleged fraud and bribery at Italy's third largest bank, prosecutors said.

Gianluca Baldassarri is the first person to be arrested in a widening scandal that has rocked the world's oldest bank and triggered a financial and political storm ahead of Feb 24-25 national elections.

Prosecutors in the Tuscan city of Siena, where the 540-year-old bank is based, said Baldassarri was accused of helping mislead regulators over the true nature of a secret derivative contract that was found in a safe by the bank's new management in October 2012.

In a statement, the prosecutors said Baldassarri was detained in Italy's financial capital Milan because they feared he might leave the country. His home in Milan was being searched, the statement added.

Contacted by Reuters, Baldassarri's lawyer, Filippo Dinacci, declined to comment.

Baldassari left Monte dei Paschi shortly after the arrival of new chief executive Fabrizio Viola in January 2012.

Prosecutors in Siena are investigating accusations of corruption in Monte dei Paschi's costly acquisition of smaller rival Antonveneta in 2007, as well as a series of loss-making derivative and structured finance trades dating back to 2006-09, which the bank says it discovered only last October.

The bank's former managers, who are being questioned by magistrates, have declined to comment. Current managers who took office last year have said they have found no evidence of wrongdoing in the Antonveneta deal, but believe the loss-making derivatives trades were wrongly hidden.   Continued...

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