Foresti, who worked at Deutsche Bank for 18 years before leaving in March, is among people the firm is scrutinizing over a 2008 deal that Banca Monte dei Paschi di Siena SpA (BMPS) used to hide losses, said the people, who requested anonymity because the review is confidential. Deutsche Bank is examining whether managers failed to supervise bankers arranging the transaction.
Foresti, 45, oversaw rates and European credit flow trading at Deutsche Bank before leaving to become Bank of America’s head of fixed-income, currencies and commodities trading in Europe, the Middle East and Africa. He hasn’t started the job because his
former employer, Germany’s largest lender, is withholding clearance with the U.K. Financial Conduct Authority, Bloomberg News reported in September.
Monte Paschi is still struggling to overcome financial strains from a 2008 acquisition and its use of derivatives to cover losses, transactions that later backfired and are under criminal investigation in Italy. The deal added to Deutsche Bank’s legal woes, including international probes into alleged manipulation of currency markets and benchmark interest rates.
Pedestrians pass a Deutsche Bank AG bank branch in Oberursel, Germany.
Disciplinary Procedures
Deutsche Bank said in June that it opened internal disciplinary procedures over the Monte Paschi transaction, dubbed Santorini. The review is focused on whether managers failed to escalate concerns over the deal, according to a person with direct knowledge of the process. Frankfurt-based Deutsche Bank is seeking to withhold part of Foresti’s deferred compensation, two people said.Foresti, who’s based in London, didn’t respond to e-mail messages. Spokesmen for the FCA and Charlotte, North Carolina-based Bank of America declined to comment.
“As we have previously said, we have an internal review into transactions we entered into in 2008 with Banca Monte dei Paschi di Siena, which is ongoing and includes employee disciplinary procedures,” Deutsche Bank said in an e-mailed statement, without elaborating on Foresti.
The German bank said in January it adjusted its accounting for the deal after uncovering facts amid an investigation by German regulator Bafin. A Bafin spokesman declined to comment when asked about the progress of the probe.
Tougher Checks
Deutsche Bank may conclude its review in several weeks, said two people. If Foresti is cleared of wrongdoing by the firm and then approved by the FCA, he can begin his responsibilities at Bank of America, said one of the people. If not, his job offer may be rescinded, the person said.Banks have been forced to push back start dates and reverse job offers for new hires amid tougher background checks. Foresti’s situation is unusual because most executives at his level are highly vetted, said Richard Lipstein, managing director of New York-based recruiting firm Gilbert Tweed International.
Bank of America managers had earlier threatened to rescind Foresti’s offer because he can’t supervise traders unless he’s licensed by regulators. Traders in London have been reporting to Bernard Mensah, Foresti’s predecessor, the people said. Mensah, 46, was given responsibility for a new emerging markets fixed-income unit in March.
The FCA, the U.K.’s markets watchdog, must approve executives who have “significant influence” over a firm’s regulated activities, including trading.
Foresti, who received an MBA from the Massachusetts Institute of Technology, initially was set to start in June at Bank of America, the second-biggest U.S. bank by assets after JPMorgan Chase & Co.
Last month, three former top executives of Monte Paschi, including the ex-chairman, were convicted of obstructing regulators and misleading authorities on the bailed-out bank’s finances. Milan prosecutors are investigating the deal with Deutsche Bank and a similar one with Nomura Holdings Inc. The banks have denied wrongdoing.
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