(Reuters) - The Court of Auditors has decided to sue four senior Treasury and Morgan Stanley executives over a total of 3,9 billion euros in damages for the closure and restructuring of derivatives on public debt, a source said close to the situation.
“The preliminary investigation phase has ended and the Court of Auditors is asking for damages. The first hearing has been set for April 2018,” the source said, asking not to be quoted.
The process should be completed by July next year. The outcome of the judgment may be appealed to the Appellate Section of the Court.
In addition to Morgan Stanley, the current head of public debt Maria Cannata, the director general of the Treasury Vincenzo La Via and the former ministers Domenico Siniscalco and Vittorio Grilli will be judged.
The American bank is asked for 2,7 billion in damages, the other about 1,2 billion.
In the event of conviction and non-payment of damages, the Court may also proceed with the seizure of assets.
"We express full confidence in the work done by the managers and trust that the work of the judiciary can shed light on the episodes being investigated", comments a Treasury spokesman.
Morgan Stanley did not comment but in August 2016, when the case emerged, it called the allegations baseless.
No comments from Siniscalco and Grilli either.
Between the end of 2011 and the beginning of 2012, the Ministry of the Economy paid the US bank around 3 billion as a result of an "Additional termination event" clause present in some contracts. The clause, according to the Court of Auditors, allowed the conclusion of contracts at the discretion of Morgan Stanley.
Between 2013 and 2016, derivatives had a negative impact on the public budget of 24 billion: 13,7 were net outlays while 10,3 were statistical reclassifications, what Eurostat calls 'net incurrence'. [nL8N1HW27Q]
The Treasury has always maintained that it used derivatives as insurance against the risk of a rise in interest rates, especially during the worst years of the financial crisis.
But, as explained by the prosecutor of the Court of Auditors in February, some of the contracts "highlighted speculative profiles that made them unsuitable for the purpose of restructuring public debt - the only one allowed by the legislation for derivative transactions - not being admissible for the State, public investor, take very significant risks".
