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Exclusive: Monte Paschi accused of misleading Italy regulator in 2012

The main entrance to Monte Dei Paschi bank headquarters is pictured in Siena January 25, 2013. REUTERS/Stefano Rellandini
The main entrance to Monte Dei Paschi bank headquarters is pictured in Siena January 25, 2013. REUTERS/Stefano Rellandini

By Silvia Aloisi and Stefano Bernabei

MILAN/ROME (Reuters) - Banca Monte dei Paschi di Siena sparked fresh controversy on Friday when it was accused of misleading Italy's market regulator as recently as October 2012, shortly before it received a 4.1-billion euro ($5.47 billion) state bailout.

Monte dei Paschi is already at the center of a judicial investigation into its acquisition of smaller rival Antonveneta in 2008 and a series of derivatives trades the bank allegedly used to conceal losses.

The bank, currently led by Chairman Alessandro Profumo and CEO Fabrizio Viola, was told by the European Commission in July to beef up an already tough restructuring plan to secure EU approval for the state aid.

Former Chairman Giuseppe Mussari and former director general Antonio Vigni, who left in early 2012, are both under investigation for market manipulation, false statements to the market and regulatory obstruction in relation to the Antonveneta deal and the derivatives trades. Both deny any wrongdoing.

A document from market watchdog Consob sent to prosecutors in Siena and seen by Reuters alleges that between April and October 2012 Monte Paschi was still submitting incomplete or inaccurate information to the regulator when asked to clarify details of certain transactions.

The document does not name any Monte dei Paschi executive, but refers to a period when the bank's new management led by Viola and Profumo was in place. Viola joined Monte dei Paschi in January 2012, while Profumo was appointed in April 2012.

In a statement, the Tuscan bank said the allegations by Consob had not been considered legally relevant by prosecutors in Siena and that its new management was not the target of a judicial investigation.

"The bank is not aware of any investigation into its new management," it said. Consob declined to comment.

MISLEADING

In the document, submitted to prosecutors on February 19, 2013, Consob said that in 2012 the bank provided "not truthful or misleading" information about a hybrid financial instrument, known as Fresh 2008, that Monte dei Paschi used to partly fund its purchase of Antonveneta.

The "omitted or incorrect" information given by the bank between April and July 2012 "undoubtedly delayed the supervisory activity of the regulator" and the adoption of measures that Consob said would have allowed it to give the market a correct and transparent picture of the bank's financial situation.

Consob also alleged that the Tuscan bank hid the true nature of a 2009 derivative contract with Japanese bank Nomura known as Alexandria in a series of written answers it gave to Consob between November 2011 and October 2012.

"The real nature of the operation was also concealed in the answers from the bank dated July 6, 2012 and October 1, 2012 in response to specific requests for information" meant to assess whether the transaction was properly accounted for by the bank, Consob said in the document.

"The concealing of such information has effectively obstructed the supervisory activity," Consob said, adding this had prevented the watchdog from taking measures to protect the interests of shareholders and the market.

Monte dei Paschi's new management has said it only found out about the true nature of the Alexandria trade after finding a secret document hidden in a safe on October 10, 2012, and promptly informed regulators about its discovery.

The restatement of Alexandria and two other derivative trades negotiated by the bank's former management caused a 730 million euros loss in Monte dei Paschi's 2012 accounts and forced it to increase its request for state aid.

The Consob allegations, first revealed by consumer group Codaocns, could lead to the market watchdog imposing sanctions on Monte dei Paschi.

They could also complicate the approval by the European Commission of the state bailout Monte dei Paschi received in February.

Codacons, which has filed a series of legal claims against Monte dei Paschi and says the bank should not have been granted the state aid, wrote a letter to EU Commissioner Joaquin Almunia on Thursday.

Codacons urged the EU not to approve Monte dei Paschi's restructuring plan and its bailout in view of the Consob allegations. Codacons also asked Economy Minister Fabrizio Saccomanni to replace the bank's current managers.

In its statement, Monte dei Paschi said Codacons was conducting a continuous and unjustified attack against the bank, and called its allegations groundless. ($1 = 0.7493 euros)

(Reporting by Silvia Aloisi and Stefano Bernabei; Editing by Lisa Jucca, David Cowell and David Evans)

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