Bloomberg
Italy Seizes Bank of America, Dexia Assets Amid Probe (Update2)
February 03, 2010, 05:01 PM EST


Feb. 3 (Bloomberg) -- Italy’s financial police are seizing 73.3 million
euros ($102 million) of assets from Bank of America Corp. and a unit of
Dexia SA as part of a probe into an alleged derivatives fraud in the
region of Apulia.

Police are investigating losses on derivatives linked to the sale of 870
million euros of bonds sold by the regional government in 2003 and 2004,
according to an e-mail from the prosecutor’s office in Bari today. The
banks misled the municipality, located in the heel of Italy, on the
economic advantages of the transaction and concealed their fees, the
prosecutor said.

The region, also known as Puglia, joins more than 519 Italian
municipalities that face 990 million euros in derivatives losses,
according to data compiled by the Bank of Italy. In Milan, prosecutors
seized assets from four banks including JPMorgan Chase & Co. and UBS AG
in April and requested they stand trial for alleged fraud. Hearings
started this month.

“Italy, like other countries, is full of these examples,” said Dario
Loiacono, a banking lawyer in Milan who isn’t involved in the case.
“It’s the result of the unavoidable asymmetry of information between the
banks and the municipal borrowers.”

Police are sequestering a further 30 million euros that the municipality
was set to place in a fund managed by the banks on Feb. 6, the
prosecutor said. The magistrate also asked that Charlotte, North
Carolina-based Bank of America be stopped from doing business with
Italian municipalities for two years. A hearing is slated for next month.

Merrill Lynch

A spokesman for Bank of America in London declined to comment. Dexia
Crediop SpA doesn’t have derivatives contracts with the region, the
Rome-based Dexia unit said in an e-mailed statement. An official for the
bank declined further comment.

Merrill Lynch, bought by Bank of America in January 2009, managed the
bond sales for Apulia in 2003 and 2004. The bank didn’t provide the
municipality with appropriate information on the financing, said the
prosecutor. Officials at the municipality didn’t speak English, and
contracts weren’t translated into Italian.

Merrill also recommended that Apulia seek advice from an international
law firm, without disclosing that Merrill itself had a long-standing
business relationship with the law firm, the prosecutor said.

Prosecutors allege that when the banks arranged swaps and created a fund
that invests money the region set aside to repay the bonds in 2023, they
misled the region about the economic advantages of the transaction.
Banks skewed the swaps to their advantage to hide fees, the prosecutor said.

Derivatives are financial instruments derived from stocks, bonds, loans,
currencies and commodities, or linked to specific events like changes in
interest rates or weather.

The seizure of Apulia’s semi-annual repayment of the bond will neither
affect the interest payments bondholders receive nor will it affect the
final repayment, the prosecutor said. Apulia is rated A1 by Moody’s
Investors Service, four levels below the top investment grade.

- - -

Well, it's a start...

Harry wrote:



Bloomberg
Italy Seizes Bank of America, Dexia Assets Amid Probe (Update2)
February 03, 2010, 05:01 PM EST


Feb. 3 (Bloomberg) -- Italy?s financial police are seizing 73.3 million
euros ($102 million) of assets from Bank of America Corp. and a unit of
Dexia SA as part of a probe into an alleged derivatives fraud in the
region of Apulia.

Police are investigating losses on derivatives linked to the sale of 870
million euros of bonds sold by the regional government in 2003 and 2004,
according to an e-mail from the prosecutor?s office in Bari today. The
banks misled the municipality, located in the heel of Italy, on the
economic advantages of the transaction and concealed their fees, the
prosecutor said.

The region, also known as Puglia, joins more than 519 Italian
municipalities that face 990 million euros in derivatives losses,
according to data compiled by the Bank of Italy. In Milan, prosecutors
seized assets from four banks including JPMorgan Chase & Co. and UBS AG
in April and requested they stand trial for alleged fraud. Hearings
started this month.

?Italy, like other countries, is full of these examples,? said Dario
Loiacono, a banking lawyer in Milan who isn?t involved in the case.
?It?s the result of the unavoidable asymmetry of information between the
banks and the municipal borrowers.?

Police are sequestering a further 30 million euros that the municipality
was set to place in a fund managed by the banks on Feb. 6, the
prosecutor said. The magistrate also asked that Charlotte, North
Carolina-based Bank of America be stopped from doing business with
Italian municipalities for two years. A hearing is slated for next month.

Merrill Lynch

A spokesman for Bank of America in London declined to comment. Dexia
Crediop SpA doesn?t have derivatives contracts with the region, the
Rome-based Dexia unit said in an e-mailed statement. An official for the
bank declined further comment.

Merrill Lynch, bought by Bank of America in January 2009, managed the
bond sales for Apulia in 2003 and 2004. The bank didn?t provide the
municipality with appropriate information on the financing, said the
prosecutor. Officials at the municipality didn?t speak English, and
contracts weren?t translated into Italian.

Merrill also recommended that Apulia seek advice from an international
law firm, without disclosing that Merrill itself had a long-standing
business relationship with the law firm, the prosecutor said.

Prosecutors allege that when the banks arranged swaps and created a fund
that invests money the region set aside to repay the bonds in 2023, they
misled the region about the economic advantages of the transaction.
Banks skewed the swaps to their advantage to hide fees, the prosecutor
said.

Derivatives are financial instruments derived from stocks, bonds, loans,
currencies and commodities, or linked to specific events like changes in
interest rates or weather.

The seizure of Apulia?s semi-annual repayment of the bond will neither
affect the interest payments bondholders receive nor will it affect the
final repayment, the prosecutor said. Apulia is rated A1 by Moody?s
Investors Service, four levels below the top investment grade.

- - -

Well, it's a start...

Derivatives are a vice. It is simply nothing but a scam dreamed up by
schemers that dreamed up hedge funds like Goldman Sachs.
hedge Funds are not even gambling it is rigging. Massive amounts of
money are used to boost prices and then they sell or skim the margin.
Little investors take the loss.
The Corporate Welfare wasn't about the American Economy it was about
rescuing these schemers and gamblers with our money and letting them
continue their casino games.
Yes jail them.