Finance is increasingly global and so are financial crimes and prosecutions.
Last month, a Milan court handed down suspended jail sentences of up to seven years and six months to 13 former and current executives of Banca dei Paschi di Siena, Deutsche Bank and Nomura International. The charges included false accounting, misleading regulators and improprieties in two complex derivatives transactions that flattened the venerable (founded in 1472) Italian lender’s financial health prior to its nationalization.
The Italian court’s prison sentences were among the toughest imposed in any trial for financial misconduct. Under Italian law the condemned remain free pending appeal. By contrast, the UK’s Serious Fraud Office (SFO) has dropped its long-running investigation into the fixing of the Libor benchmark interest rate—even though in practice, manipulating Libor probably caused far more widespread damage to other banks, companies and individual consumers across the world.
The three Italian judges also ordered fines and asset seizures from Deutsche Bank and Nomura totaling nearly €160 million. Both banks expressed disappointment and may appeal, along with the individual bankers involved. That could prolong the case for two years or more.
Among those convicted are Monte dei Paschi’s former chairman, Giuseppe Mussari, who was given the toughest jail sentence of seven years and six months; and Michele Faissola, the former head of Global Rates at Deutsche Bank, who was reputedly one of Europe’s most influential bankers. More recently, Faissola has been advising the ruling al-Thani family of Qatar, whose sovereign wealth fund has been a key investor in both Deutsche Bank and Barclays.
The SFO continues to press its case against three senior Barclays executives over side deals linked to Qatar’s injection of £4 billion into the bank at the height of the financial crisis, which helped stave off an unwanted UK government bailout. No Qataris are indicted in the SFO charges against Roger “Big Dog” Jenkins, Tom Kalaris and Richard Boath. (The bank’s former finance director, Chris Lucas, is too ill to stand trial.) At the center of the case is whether the advisory services agreements used by Barclays were a “dishonest mechanism” used to pay Qatar £322 million for its £4 billion investment.
Both the Barclays and Monte dei Paschi cases center on misleading markets and dishonesty in rescuing a failing bank. In Italy, the trial has provided ammunition for Matteo Salvini’s anti-elite populist rhetoric. The same could happen in a deeply divided Britain, although the UK’s prosecution of market traders has been less successful, with the SFO achieving only four convictions out of 13 individuals originally charged.
