Paschi Judges Set to Rule on Deutsche Bank, Nomura Sentences

(Bloomberg) -- It’s finally happening.

After three years and countless hours of testimony, judges in Milan will say on Friday whether executives at Monte Paschi di Siena SpA, Deutsche Bank AG and Nomura Holdings Inc. broke the law to help the Italian bank hide hundreds of millions of euros of losses from the market.

In all, prosecutors called for jail sentences for 11 ex-employees of the three companies as well as penalties against the German and Japanese banks. Monte Paschi as a company reached a plea bargain in 2016.

The verdict will be announced around 4 p.m. local time, lead judge Lorella Trovato said on Friday morning.

The Prosecution’s Case:

Monte Paschi’s managers are 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.

Both transactions were carried out to cancel previous losses by building up two-leg deals, with one leg giving Monte Paschi an immediate gain and the other loss-making one designed to be spread over several years, according to prosecutors.

The Defense’s Case:

Deutsche Bank defendants in previous hearings rejected the allegations, saying that Santorini was a legitimate transaction and carried risk, and was not designed as a sure-fire bet to hide losses at the Italian bank, as prosecutors allege. Nomura lawyers argued that the Alexandria deal was legitimate and not designed to hide losses at Monte Paschi. Monte Paschi’s lawyers also rejected the allegations against their defendants, arguing that the deals were conceived to boost Monte Paschi’s interest margin and reduce previous risks.

Who Is Accused:

Monte Paschi: Giuseppe Mussari, Antonio Vigni, Daniele Pirondini, Gianluca Baldassarri, Marco Di Santo

Deutsche Bank: Michele Faissola, Michele Foresti, Dario Schiraldi, Marco Veroni

Nomura: Sadeq Sayeed, Raffaele Ricci

To contact the reporter on this story: Sonia Sirletti in Milan at ssirletti@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Ross Larsen

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