Italy's telecom sector Wednesday was reeling from the news that two of its biggest operators were caught up in a massive fraud allegedly orchestrated by members of the Calabrian Mafia, considered the most powerful and dangerous of the country's organized crime groups.
Rome Judge Aldo Morgigni Tuesday issued arrest warrants for 56 people accused of participating in a €2 billion (US $2.7 billion) fraud involving the sale and purchase of non-existent international telephone traffic and evasion of €400 million in VAT (Value Added Tax).
Among the most high-profile targets of the probe was Silvio Scaglia, a former CEO of mobile-phone operator Omnitel and founder of the fast-growing Internet and telephone company Fastweb. Italy's 13th-richest individual since the sale of Fastweb to Swisscom in 2007, Scaglia was travelling on business in Latin America when news broke Tuesday of a warrant for his arrest.
The other leading company embroiled in the scandal was Telecom Italia Sparkle (TIS), a subsidiary of the former Italian incumbent specializing in premium international telephone traffic. Former TIS CEO Stefano Mazzitelli was among those arrested Tuesday, while his former chairman at the company, Riccardo Ruggiero, is under investigation. Current Fastweb CEO Stefano Parisi is also reportedly under investigation in the fraud.
In a 1,600-page document justifying the arrests, Judge Morgigni described the "carousel" fraud as one of the biggest in Italian history. The document said TIS and Fastweb had received false invoices in collusion with four Italian companies: CMC, Web Wizard, I-Globe and Planetarium. The invoices were for nonexistent telecom services, and allowed the fraud participants to siphon large sums of money from TIS and FastWeb, laundering the money abroad by using companies and banks in locations including Panama, Hong Kong, Luxembourg, Switzerland, San Marino, Vienna and London. The scheme also allegedly allowed the participants to claim VAT credit from the government.
The judge cited the exceptional size of the losses caused to the Italian state, the length of time that the fraud lasted, and the fact that Fastweb and Telecom Italia Sparkle were major players on the stock market as factors exacerbating the gravity of the case. He said the fraud group's links to the Calabrian 'Ndrangheta gave it an exceptional capacity for intimidation, with a practice of violence that "often led to the killing both of those who opposed the criminal plot and of members of the crime organization whose loyalty was in doubt."
Prosecutors who investigated the case have asked the judge to appoint a judicial commissioner to take over management of the two companies, and a hearing on the request has been scheduled for March 2.
Fastweb and Telecom Italia SpA, TIS' holding company, promptly issued statements insisting the criminal activity had taken place several years ago and the two companies involved were the victims, rather than the perpetrators of the alleged fraud. Fastweb said the eventual naming of a court-appointed administrator would not interfere with its ongoing service to customers.
Swisscom was aware of the VAT controversy when it purchased Fastweb and would be collaborating fully with the investigators, the Swiss telecom operator said in a statement Wednesday.