Italy's Police Seize $140M From Nomura Claiming Fraud In Sicily's Deals

  @SnehaShankar30 on July 29 2014 6:53 AM
Nomura Holdings
A man walks next to a sign for Nomura Securities in Tokyo July 25, 2013. Reuters/Yuya Shino

Italy’s police on Monday seized nearly $140 million in cash and property from Nomura Holdings, Inc. (TYO:8604), and accused it of committing fraud in a debt-restructuring deal that it worked on for the Sicilian government.

Local police said that the fraud committed by the Japanese financial services company cost Sicily’s administration a loss of 175 million euros ($235 million). The authorities claimed that the problems began because four Nomura employees used a complex derivatives trade between 2000 and 2006 that did not function as expected, according to Reuters. The authorities are also investigating three more people in the matter, and Nomura has reportedly said that it is reviewing the situation and will cooperate with the authorities in the probe.

Italian regulators seized bank accounts and credit valued at 98 million euros ($131 million) from Nomura along with 6 million euros ($8 million) in property. Sicily’s police also seized assets worth $6.5 million euros from four former Nomura employees and three local consultants, accusing them of trying to conduct fraud while selling complex derivatives to the island's administration to restructure its debt.

Nomura had created three derivatives contracts to restructure Sicily’s debt, causing the administration to lose 60 million euros ($80.60 million), according to Bloomberg. The company has also reportedly been accused of bundling health care debt at “onerous” interest rates in 2002, triggering losses worth another 115 million euros ($154 million) for Sicily. By 2008, Sicily had invested nearly 26.9 billion euros ($36.13 billion) in derivatives, whose nominal value was estimated at 9.8 billion euros ($13.16 billion) in March, according to Bloomberg.

In March, a Milan court flipped an earlier decision to find banks including JPMorgan Chase &Co. (NYSE:JPM) and UBS AG (NYSE:UBS) not guilty of fraud when they sold derivatives to the city of Milan, in a similar case. Many local governments in Italy have taken several international banks to court for losses incurred on complex derivatives, Bloomberg reported.

Last year, Italian prosecutors also seized nearly $2.35 billion from Nomura after Italy’s third-largest bank, Banca Monte dei Paschi di Siena S.p.A (BIT:BMPS), or MPS, bought derivatives and accused Nomura’s employees of issuing false statements and of obstructing local regulatory officials from conducting their investigation.

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