Archive for October, 2014

The court acknowledges that the founder of Fastweb did not commit crimes. The sentence comes after 147 hearings in three years – the company director, held under arrest for a year, had returned to Italy to cooperate with the judiciary

On October 17 2013, the Court of Rome fully acquitted Silvio Scaglia of the accusation of criminal association with intent to evade tax. The judges established that “there is no proof of his involvement in the illicit activity” conducted by a criminal organization. Along with Scaglia, the Fastweb and Telecom Italia Sparkle managers involved in the investigation were also acquitted.

Mr. Scaglia, who was abroad when he heard the news of his arrest warrant on February 23 2010, promptly returned to Italy in order to place himself at the disposal of the judiciary. For 90 days he was incarcerated in the prisons of Rome, before being placed under house arrest, which was applied in an extremely severe form for three months. The trial, after 147 hearings in 35 months (from November 23 2010 to October 17 2013), during which hundreds of witnesses testified, confirmed that Mr. Scaglia had absolutely no involvement with the VAT evasion carried out by a criminal organization which had exploited Fastweb, a victim of the fraudulent scheme.

The sentence states that the illegal mechanism set up by the criminal organization was conducted through “two distinct, consecutive fraudulent commercial operations [named “operazione Phuncard” and “Traffico Telefonico”, ed.] through which the association made illegal profits totalling 360 million euros in VAT which was not paid to the State. This amount was then “laundered” through the interposition of numerous Italian and foreign companies, in order to impede the identification of its criminal origin”.

The prosecution argued that behind the operation was “a criminal alliance between corporate managers and large criminal groups, which made it possible to carry out one of the largest VAT frauds”. In short, in both the “Phuncard” and the “Traffico Telefonico” cases, the criminals stand accused of having used the funds of Fastweb (and of Telecom Italia Sparkle) in order to “have the liquidity necessary to achieve the ‘carousel’ and for their part, various managers are thought to have exploited the fictitious transactions to reach targets for turnover, profits and margin for the purposes of what is known as embellishment of financial statements”.

The 1800-page sentence, in which those responsible for the fraud are punished, rejects this theory in full.

Indeed, the Bench expressed a “clear judgment on the complete non-involvement of the accused, Silvio Scaglia, in the matter”. “It has not been proved nor is it provable”, the sentence states, “that he had any knowledge of the formidable probative evidence established by the results of the complex letters rogatory”.

Hence the “rightful acquittal of the defendant under count 2 of the indictment [untruthful declaration through the use of invoices or other documents for inexistent transactions, Ed.], because the fact does not amount to a criminal offence”.

Moreover, the sentence acknowledges that the companies did not possess the tools necessary for exposing the fraud, which was carried out through “fictitious contractual relationships between shell companies artfully set up in order to justify the various transfers of capital”. In order to get to the bottom of the complex financial flows, the investigators had to resort to investigations made possible by “complex, elaborate letters rogatory, which were clearly beyond the reach of the company managers”.

Lastly, the sentence disputes the theory whereby Silvio Scaglia, due to his position as the overall head of the company, could not have not known. On the contrary, having commended the auditing activities carried out within the company and cited inspections and consulting which underlined “the absolute irrelevance of the non-core activities from the perspective of the investors and, in general, the financial markets”, the sentence notes that Scaglia’s participation in the life of Fastweb “during the course of the phone traffic operation had been minimal, a fact which is proven by the lack of any form of contribution (e-mail, correspondence including by phone) to the executive aspects of the matter”.

Besides, at the time Silvio Scaglia was already moving on: “his approach and personal and professional inclination – he himself stated before the Court – had always been that of creating companies, managing a Start-up until it had reached a level of maturity and stability that would allow him to change his target. This had happened previously at Omnitel, and it occurred in the same way with FastWeb, given that in 2005, having realised that the company had reached a level of maturity that would allow a new change of direction, he had come to the decision to cultivate new entrepreneurial projects”.

As he in fact did, once the burden of an unjust accusation had been removed.