3 Ex-Bank Executives Are Sentenced in Italy

By Gaia Pianigiani; Jack Ewing | International New York Times, November 1, 2014 | Go to article overview

3 Ex-Bank Executives Are Sentenced in Italy


Gaia Pianigiani; Jack Ewing, International New York Times


Three executives at the Italian lender were accused of hiding a convoluted derivatives contract that helped it conceal its losses.

Three former managers blamed for the crisis that has befallen the world's oldest bank, and devastated the community whose economy depended on it, were sentenced on Friday to jail time and banned from public office for five years.

The executives of the bank, Monte dei Paschi di Siena, were accused of hiding a convoluted derivatives contract that helped it conceal its losses.

A three-judge panel handed down three-and-a-half-year jail sentences to the executives: Giuseppe Mussari, former president of Monte dei Paschi di Siena; Antonio Vigni, the former chief executive; and Gianluca Baldassarri, the former chief financial officer.

They were also sentenced to pay civil damages that had yet to be determined. All three will appeal the decision, their lawyers said, a process that in Italy suspends the execution of the sentence.

Under Mr. Mussari, Monte dei Paschi acquired another Italian bank, Antonveneta, in 2008, for 9 billion euros, or $11.3 billion at current exchange rates, a price that was considered wildly inflated and left the bank financially weakened.

After the executives left the company in 2012 because of its poor financial performance, the derivatives contract, with the Japanese bank Nomura, was found in a safe in the bank's fortresslike medieval headquarters in the historic center of Siena.

Though the charges of obstructing regulators were relatively minor, the damage caused by years of mismanagement and possible fraud at Monte dei Paschi has been enormous. The bank, founded in 1472, was the largest employer in Siena, and it helped finance a host of community projects and services, including child care, ambulance services, the local professional soccer team and Siena's famous bareback horse race, the Palio.

That largess has evaporated.

"You all have to go to jail," a woman shouted at Mr. Vigni as he walked into the courthouse in Siena on Friday morning.

Now the bank is struggling to survive.

In announcing the results of its review of banks in the eurozone, the European Central Bank said on Sunday that Monte dei Paschi had to raise EUR 2.1 billion to plug a shortfall in funds it would need to survive a financial crisis or severe economic downturn.

The capital shortfall at Monte dei Paschi was the largest of all 130 banks examined by the central bank. The assessment was part of an attempt to clean up the eurozone's ailing banking system and to increase the flow of credit.

After the central bank's review, Monte dei Paschi said it had hired UBS and Citigroup as financial advisers to help it devise a plan to raise capital and evaluate "all strategic alternatives." Those alternatives could potentially include a merger with a stronger bank.

Prosecutors had asked for a seven-year sentence for Mr. Mussari and six-year sentences for Mr. Vigni and Mr. Baldassarri. The maximum sentences would have been eight years. All three men face at least one separate investigation in Milan into possible insider trading, a more serious charge that carries a maximum sentence of 12 years. …

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