Scandals and investigations: BNP senior officials examined in trading probe

Paris prosecutors have started examining several senior BNP Paribas SA officials with a preliminary insider-trading probe related to the lender’s record settlement in the U.S. The prosecutors 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 knowing the matter said in an interview with the Wall Street Journal.

According to his words, the list of BNP Paribas officials targeted by the investigation is fluid, because investigators continue to pore over the details of stock sales by a number of company officials. 

Prosecutors can decide to launch a formal investigation or drop it at the preliminary stage - this will depend on their findings.

In June BNP Paribas agreed 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 penalty was shocking 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. The fine marked the largest ever paid by a bank for violating U.S. economic sanctions.

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.

Bank's heads

The newest probe is more specifically aimed at the bank’s chairman, Baudouin Prot, Chief Operating Officer Philippe Bordenave and Honorary Chairman Michel Pébereau, as reports French weekly Le Canard Enchaîné.

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.

An informer close to bankers said Messrs. Prot, Bordenave and Pébereau have sold no BNP Paribas shares in 2014.

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