Paschi trial: Deutsche Bank defendant defies prosecutors

Bloomberg

An ex-Deutsche Bank AG banker told a Milan court that the controversial Santorini transaction signed with Banca Monte dei Paschi di Siena SpA was a risky deal for the German bank and was properly accounted for by the Italian lender, challenging the prosecution’s case.
Marco Veroni, the first Deutsche Bank defendant questioned by prosecutors at the Milan trial, disputed the accusation that the deal had no real risk and was constructed to disguise an ongoing loss at the Siena bank with a temporary gain.
“Deutsche Bank could only sign a deal that implied an economic risk, and this wasn’t an exception,” he said at a hearing in Milan. “The two legs of the structure were based on different variables, they were logically linked but separate and different.”
Veroni, 50, a Deutsche Bank account manager in charge of relations with Monte Paschi at the time of the deal, is among six former bankers at the German lender accused of colluding with Paschi to cover up losses through a deal known as Santorini. He left the bank in 2012.
Prosecutors say that the complex transaction Deut-sche Bank helped put in place in 2008 hid more than 360 million euros ($419 million) of losses that Paschi was facing on a previous deal. They built up a winner-loser construction that was split in two parts: each prong of the bet simply wagered on an index that was the exact inverse of the other.
On one half of the deal, Paschi would make a certain, moneymaking bet with Deutsche Bank and use those winnings to extinguish its 2008 trading losses. For the second half, the Italians would make a losing bet of at least 429 million euros, to neutralise the derivative losses and include fees due to Deutsche Bank, whose effects would play out slowly, over many years.
Veroni disputed the prosecution’s characterization of the deal, saying that the-re were four possible outcomes for the two bets.