MILAN, May 22 (Reuters) - Italian tax police said they had arrested the former chairman of Banca Carige over allegations of fraud, in the latest scandal to engulf the Genoa-based lender as it appeals to investors for 800 million euros ($1 billion) in fresh capital.
Giovanni Berneschi, 76, was ousted in September 2013 after 20 years as Carige’s chairman in a management overhaul requested by the Bank of Italy. Audits of the lender by the central bank revealed poor lending practices, a large derivatives exposure and questionable accounting methods.
Carige, controlled by a cash-strapped foundation with close ties to local politicians, is one of 15 Italian banks under scrutiny by the European Central Bank in a review of lenders across the euro zone this year.
Its core capital ratio is currently below an 8 percent threshold set by the ECB and the bank is counting on next month’s share sale to boost it to 9.5 percent.
Berneschi was arrested along with six other people on suspicion that he and others forced the bank’s insurance unit Carige Vita Nuova to buy assets at an inflated price in 2006 and 2009 for their own profit, prosecutors said in a statement.
Among those arrested was Carige Vita Nuova’s former Chief Executive Ferdinando Giovanni Menconi, who was also a board member at Carige between 1995 and 2009, prosecutors said.
Prosecutors said 21.9 million euros of illicit profits from the sales were stashed in Switzerland and used in part to buy a hotel in Lugano. Police said they seized an equivalent amount in assets on Thursday, without elaborating.
Police said in a separate statement that the probe had “proved that management was strongly influenced by the charismatic leader who for 20 years held the reins of the banking and insurance group”.
Berneschi, who is deputy chairman of Italy’s banking association ABI, was placed under house arrest, police and prosecutors said.
It was not immediately possible to reach lawyers for Berneschi and Menconi.
Since Berneschi’s departure, Carige’s new management has been trying to turn the lender around.
Under Chief Executive Piero Montani, the bank has been restructuring, closing branches and cutting back on loans to bolster its finances, after a balance-sheet clean-up led to a 2013 net loss of 1.76 billion euros.
Montani hopes to complete by year-end the long-awaited sale of Carige’s insurance assets, including Carige Vita Nuova.
In a sign of the challenges faced by the bank, its shares dived 17 percent on Wednesday after its top shareholder - the Carige foundation - struggled to sell a stake in the bank.
The foundation managed to sell an 11 percent holding, less than planned, only after offering a larger discount to the market price than initially indicated.
Carige Chairman Cesare Castelbarco Albani said in a statement after news of Thursday’s arrests that the bank may take legal action to protect its interests.
“We’ve learnt of the magistrates’ actions and we have full confidence in them. From what we know, Banca Carige is the damaged party,” he said. ($1 = 0.7318 Euros) (Editing by Tom Pfeiffer)