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BNP Paribas Officials Examined in Insider-Trading Probe

by NOÉMIE BISSERBE - Open-Publishing - Friday 28 November 2014

Paris Prosecutors Seek to Determine How Much Senior Managers Knew About U.S. Litigation Risks

PARIS—French prosecutors are targeting several senior BNP Paribas SA officials with a preliminary insider-trading probe related to the lender’s record settlement in the U.S., a person with knowledge of the matter said Tuesday, possibly complicating efforts by one of Europe’s largest banks to draw a line under a difficult chapter.

Paris prosecutors, who opened the preliminary investigation earlier this month, are trying to determine how much senior BNP Paribas directors and top executives knew about the bank’s exposure to litigation risks in the U.S. when they sold shares last year, the person said. The list of BNP Paribas officials targeted by the investigation is fluid, the person said, because investigators continue to pore over the details of stock sales by a number of company officials.

Depending on their findings, prosecutors can decide to launch a formal investigation or drop it at the preliminary stage.

BNP Paribas agreed in June to pay nearly $9 billion and plead guilty to crimes for violating U.S. sanctions against Sudan, Iran and Cuba, an unprecedented settlement closing a yearslong investigation and ending negotiations between the French bank and U.S. authorities. The hefty penalty came as a shock to many investors, because the bank had played down litigation risks related to the U.S. probe and had set aside provisions of just $1.1 billion against its fourth-quarter earnings in 2013.

According to French weekly Le Canard Enchaîné, which broke the news earlier Tuesday, the newest probe is more specifically aimed at the bank’s chairman, Baudouin Prot, Chief Operating Officer Philippe Bordenave and Honorary Chairman Michel Pébereau .

Messrs. Prot, Bordenave and Pébereau didn’t respond to requests for comment.

According to corporate filings, Mr. Prot sold shares valued at €9.25 million ($11.52 million) in eight transactions during 2013, while Mr. Pébereau and Mr. Bordenave sold €2.46 million and €1.32 million in BNP Paribas shares, respectively.

Mr. Prot sold his shares at an average price of €44.2 each, while Mr. Pébereau and Mr. Bordenave sold BNP Paribas shares at €49.2 and €44.7 on average, respectively. BNP Paribas shares rose 27% to €58 between Jan. 1, 2013, and Feb. 13, 2014, when the French bank announced it had set aside $1.1 billion in provisions to cover potential U.S. litigation costs. Its shares fell 15% to €49 between February and the settlement in June amid news reports pointing to the likelihood of a much bigger fine.

A person close to the bankers said Messrs. Prot, Bordenave and Pébereau have sold no BNP Paribas shares in 2014.

BNP Paribas in September said Mr. Prot will step down on Dec. 1 and be succeeded by one of his senior advisers, Jean Lemierre. The bank said Mr. Prot had made “a personal decision to take a step back.”

The French bank in June agreed to the giant fine for violating U.S. sanctions against Sudan, Iran and Cuba as part of a settlement that included a yearlong ban on its ability to conduct certain U.S. dollar transactions. The fine marked the largest ever paid by a bank for violating U.S. economic sanctions.

U.S. officials alleged the French bank worked to disguise billions of dollars in financial transactions in violation of American sanctions against these countries and to hide its own role in the process by setting up a web of satellite banks, despite warnings by some within the firm about the legality of the transactions.

According to the allegations, BNP agreed not to mention the names of the sanctioned entities in U.S. dollar transactions and to instruct its personnel to omit such names. In one instance, the bank in court documents acknowledged using regional banks overseas to process more than $20 billion in financial transactions linked to companies and government agencies in Sudan, at a time when the nation was engaged in what the U.S. and others call genocide.

NOÉMIE BISSERBE

—Saabira Chaudhuri contributed to this article.

http://online.wsj.com/articles/senior-bnp-paribas-managers-target-of-french-preliminary-insider-trading-probe-1416331518

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