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An enormous banking scandal in Italy has spread to international investment firms, including America’s own JP Morgan group. On Thursday, Italian tax police arrived at JP Morgan’s Milan offices to search for documents as part of their investigation into suspected fraud at Banca Monte dei Paschi di Siena bank.
Though JP Morgan is not currently being investigated for fraud in Italy, they have had dealings with Monte dei Paschi bank, which is suspected of enormously overpaying for rival bank Antonveneta in 2007, a purchase which brought Monte dei Paschi to the verge of bankruptcy and necessitated a 4 billion euro bailout by the Italian government. The bank was also accused of making bad trades with foreign banks that were often hidden from regulators in an attempt to hide losses. Monte dei Paschi has been in business for 500 years, and is considered to be an Italian institution. Italian prosecutors are investigating whether these bad purchases were the result of fraud or kickbacks paid by bank management.
Reuters reports that JP Morgan’s Milan office was searched because they had helped Monte dei Paschi finance the 9 billion euro purchase of Antonveneta with a 1 billion euro hybrid bond. While JP Morgan is currently not implicated in the suspected fraud, nor are they expected to be, investigators were seeking documents relating to the transaction between the two banks.
The Italian police have also seized 1.95 billion euros from Nomura, the largest brokerage firm in Japan, as part of the investigation. Prosecutors say that their objective is to prevent Monte dei Paschi from losing any more money to the Japanese firm over a deal that is now in jeopardy due falling interest rates.
For their part, JP Morgan claims they have acted in accordance with Italian law and say that they have been working with the country’s tax police.
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“The tax police are here to acquire documents and we are handing them over to them” said Giorgio Perroni, an Italy-based attorney for JP Morgan.
A source within JP Morgan told Reuters that the bank is not under investigation, and that the documents that police were searching for have been turned over.
