While Goldman's "derivative-based financial advice" to Greece before the EU enabling them to join the party seemingly went unpunished, Nomura has not been so lucky. Having created complex derivatives transactions to 'help' Sicily's regional government, which have now produced major losses for the duped managers, The FT reports [7]Nomura has had property and cash worth $150 million seized related to allegations that the investment bank defrauded the regional government of Sicily with the sale of derivatives in 2002.
The seizure was undertaken following an investigation by Italian prosecutors that showed that the bank allegedly had duped managers of the regional council causing a loss to the region of about €175m, the tax police said in a statement.
...
According to the police, Nomura created three complex derivatives transactions and interest rate swaps related to debts owed by a holding related to Sicily’s healthcare authority.
In a countrywide swoop involving police from Sicily to Milan, 54 properties, share holdings in 13 companies and cash were seized, they added.
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The swoop is the latest on international investment banks in Italy. Several regional governments and local councils have sought to take investment banks to trial over the sale of derivatives made mostly in the early 2000s. The investigations were almost exclusively focused on interest rate swaps.
Between 2001 and 2008, 525 Italian local authorities entered into almost 1,000 interest swaps with an aggregate value of €35bn, according to Italy’s audit office and central bank. This was equal to almost one-third of all the debt owed by Italy’s regions, provinces and municipalities.
Of course we doubt this was a one-way street, and the FT adds,
The tax police said they were also investigating the extent of the involvement of local politicians in the agreements with Nomura.
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As usual, all the time the financial engineering is helping (in this case to restructure debt to make Sicily appear more attractive), then all is well; but once losses appear, it's fraud... Crucially, Nomura needs some more alumni in officialdom...
