Prosecutors in Milan are expected as soon as today to request indictments of several global banks -- including units of Citigroup Inc., UBS AG, Deutsche Bank AG and Morgan Stanley on charges of violating securities laws in their dealings with failed Italian dairy company Parmalat Finanziaria SpA, according to people familiar with the matter.
The requests would cap an 18-month investigation into transactions crafted by the banks that prosecutors say helped Parmalat mislead investors about the true nature of its deteriorating finances.
Parmalat, once a jewel of Italian industry, collapsed in late 2003 after it became known that more than $16 billion had vanished from the company in one of Europe's biggest corporate frauds.
Prosecutors are requesting the indictments of the Italian unit of Citigroup; the London and Milan units of Morgan Stanley; and the Italian and British arms of Deutsche Bank, the people familiar with the matter said. The British unit of Swiss bank UBS AG and Nextra, the asset-management arm of Banca Intesa SpA, as well as 13 individuals connected to all the institutions involved, are likely to have charges sought against them, those people said.
A spokeswoman for Deutsche Bank declined to comment, as did spokesmen for Morgan Stanley and Citigroup. A spokeswoman for UBS said the bank hadn't received notification of any charges.
She added that "UBS has absolutely no evidence that any of its employees have done anything misleading, fraudulent or illegal in their dealings with Parmalat or were aware of the true state of Parmalat's finances." Nextra could not be reached for comment.
Prosecutors had signed the indictment requests as of last night and were finishing the paperwork before filing it with the court, the people familiar with the matter said.
A judge is expected to hold hearings on whether to accept the requests and order trial.
A judge has already ordered three executives at the Italian branch of Bank of America Corp. to stand trial, along with Parmalat's former chairman, Calisto Tanzi, and two partners at the Italian unit of auditing firm Deloitte & Touche, for alleged markets-related abuses.
Securities-law violations, such as issuing false information to financial markets, carry a maximum of five years in jail in Italy, while companies can face heavy fines.
Prosecutors think the individuals for whom they plan to seek indictments issued false statements that misled investors in Parmalat stock and bonds, according to people familiar with the matter. The institutions they worked for, prosecutors think, didn't have the adequate structures in place to prevent the alleged violations, those people said.