Tuesday April 28, 05:40 PM
Four foreign banks in Italy fraud probe: reports
MILAN, Italy (AFP) - Italian investigators have seized nearly half a billion euros in assets held by four foreign banks as part of a probe into an alleged fraud against the city of Milan, police said Tuesday.
A statement from the financial police said they had acted on Monday, enforcing a court order, seizing more than 476 million euros (622 million dollars).
The banks -- JP Morgan of the United States, Germany's Depfa Ban and Deutsche Bank (Xetra: 514000 - news) and UBS (Virt-X: UBSN.VX - news) of Switzerland -- are accused of failing to inform the Milan authority of the risks carried by financial derivatives that they issued in connection with a debt renegotiation.
The authorities, who also accused the banks of falsely claiming that the deal would generate savings, blocked the banks' access to shares held in Italy, the police said, confirming a report in Italy's leading Corriere della Sera daily.
Investigators in addition seized assets of two former senior officials of the Milan authority, Corriere reported.
The seizure of foreign bank assets was an unprecedented move in Italy, said another daily, Il Sole 24 Ore (Milan: S24.MI - news) , which reported that Milan prosecutor Alfred Robledo suspects the banks made 100 million euros in illicit profits.
Robledo is also investigating whether public officials received kickbacks, according to the paper.
Corriere reported that the two former Milan authority officials and 12 senior banking executives were being investigated for "aggravated fraud" against the authorities in Milan, Italy's economic capital.
The fraud allegedly took place in 2005 when the northern city signed a 1.7-billion-euro loan as part of a move to restructure its debt.
Il Sole described it as the biggest such financial operation ever carried out by a European city.
Given unfavourable interest rates, Milan's losses are calculated at around 300 million euros. But the final losses will not be known until the loan is paid off in 2035, said city officials.
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