The city of Milan reached a tentative settlement in a two-year-old fraud case against four major banks that arose from a derivatives contract sold to the Italian city in 2005, Bloomberg News reported Thursday.
Milan accused JP Morgan Chase & Co. (NYSE: JPM), UBS AG (NYSE: UBS), Deutsche Bank AG (NYSE: DB) and Depfa Bank PLC of tricking it into buying a 30-year interest rate swap contract by not disclosing the fees. The case was first brought in 2010.
The fees for arranging the $628 million swap contract, which adjusted payments on a $2.24 billion bond offering by Milan, ran to $133 million.
Under terms of a proposed settlement, the banks will reverse the contract for $84 million and the city will get about $628 million from the banks, the mark-to-market value of the contract. In addition, Milan will drop a civil suit against the banks and withdraw as a plaintiff from a criminal case against the banks that arose from the 2005 deal. The criminal case continues.
Also, a Milan court released $142 million of the four banks' money that had been seized after the case began, according to Agenzia Giornalistica Italia.
None of the banks admitted wrong-doing.