Offshore tax evasion and money laundering probe launched in Italy

By added on 26/02/2010

Telecom Italia launched a "thorough investigation" last night into the role of one of its subsidiaries in an alleged €2bn tax evasion scam, which Italian prosecutors believe could be one of the biggest in the country's history, the Financial Times is reporting.

Franco Bernabé, chief executive, said the board of Italy's biggest telecommunications group was examining 1,600 pages of court documents relating to a sweeping tax evasion and money laundering probe involving Sparkle, its wholesale voice and broadband business, and Fastweb, another Italian telecoms group.

The alleged €2bn ($2.7bn) fraud centres on invoices for premium phone services involving Sparkle, Fastweb and a network of offshore companies in Panama, Luxembourg and other jurisdictions between 2003 and 2006. Prosecutors and Italy's tax police are investigating alleged evasion of €350m in value added tax.

"We will take the time in the next month to make a thorough investigation of the situation" at Sparkle, said Mr Bernabé after the authorities seized €300m of its cash. The seizure forced Telecom Italia to postpone a meeting with analysts and investors in Milan today and the announcement yesterday of its 2009 results.

Mr Bernabé said it was "too early to say" whether the group's exposure to the alleged fraud would be limited to €300m. "We expect that from our point of view the position of the company is fully protected," he added.

A judge in Rome issued arrest warrants on Tuesday for 56 people in connection with the alleged fraud.

Aldo Morgigni, the chief prosecuting magistrate in the investigation, described the scale of the alleged wrongdoing as "among the biggest frauds there has ever been in Italy". A judge is due to hear the case against the two companies on March 2.