Criminal inquiries that cast a cloud over the past of Europe's Mr Clean

By Ambrose Evans-Pritchard

Biography of Romano Prodi - Italy My Love

The Daily Telegraph, May 4, 1999

ROMANO PRODI, the incoming President of the European Commission who is expected to sail through a pro-forma confirmation process this week in the European Parliament, has been under criminal investigation in Italy twice during the last 15 years.

It is hard to assess the gravity of the allegations and criticisms against him. The Italian judicial system is secretive. Although The Telegraph has obtained some damning documents, most of the key reports and rulings, as well as sworn testimony, is sealed.

The Italian press is largely controlled by Prodi's allies. During his successful tenure as Prime Minister, he was seen as the only figure who could keep Italy on track for the euro. The Italian establishment - poteri forti - has instinctively closed ranks behind him. For the Italian people, he has become a national mascot.

Romano Prodi: has the support of his fellow Italians Tony Blair moved swiftly in March to replace the disgraced Jacques Santer with Prodi. At the time, No 10 presented him as the reformer who had cleaned up Italy. With ties to the LSE, Harvard and the American bank Goldman Sachs, he was valued as a fully-signed up member of the Third Way.

Critics say he is a consummate networker who rose to prominence through the Christian Democratic Party but deftly re-positioned himself when the party disintegrated in the "Mani Pulite" corruption scandals. The allegations mostly stem from Prodi's two tours of duty as head of the Istituto di Riconstruzione Industriale, IRI, Italy's biggest state holding company.

Most involve disputes over the privatisation of public companies, a point of intersection between state and market that often lends itself to suspicion because of the windfall profits that can be channelled to. Arguably, the matters involved are more serious than those that destroyed Santer's presidency.

Santer was never accused of criminal misconduct. The criticisms by independent experts, never put to the test in a court of law, related to loss of control over the EC and tolerating cronyism.

"Prodi's done worse things than Santer, without doubt," says Prof Pietro Armani, Vice-President of IRI from 1980 to 1991, but now an MP for the anti-Prodi Alleanza Nazionale. He described Prodi's management of IRI as "disastrous", adding that "he didn't clean up anything except his external image".

Caution is required because the criminal justice system has frequently been misused in Italy to settle political scores. But this does not appear to have been the case with Prodi. "He was never prosecuted with the same harshness as others," says Massimo Pini, former head of privatisation at IRI.

Prodi was lucky that his first troubles occurred in the mid-Eighties, before the "Mani Pulite" purge of the elite. His later troubles occurred in the mid-Nineties, by which time scandal fatigue had sapped the will to prosecute politicians and it was felt that zealous magistrates had gone too far.

Cirio-Bertolli-De Rica

In November 1996, Giuseppa Geremia, a Roman prosecutor, concluded that there was enough evidence to press charges against Prodi for "abuse of office" in the privatisation of a food conglomerate, Cirio-Bertolli-De Rica. She believed that the group had been sold at less than half of its real value while he was president of IRI in 1993.

More seriously, she also accused him of criminal "conflict of interest" because the Bertolli part of the group ended up in the hands of the Anglo-Dutch company Unilever, where Prodi has been a paid advisory director from 1990 to 1993. By the time Dr Geremia acted, Prodi was Prime Minister. The move caused a firestorm. She was denounced in the media, her offices were broken into and her career was blighted.

The conglomerate was sold off by IRI in October 1993 to an unknown company with inadequate capital and ties to the corrupt Christian Democrats in the South.

The sale price was 310 billion lire. Months earlier, Credito Italiano had valued the IRI stake at 600-900 billion lire. The circumstances of the deal were so bizarre that even Prodi's friend Antonio Bassolini, now Mayor of Naples, called it a "scandalous and dirty transaction".

According to Corriere della Sera, the purchase company, known as Fi.Svi, appeared out of nowhere and disappeared again without trace three months after the deal. By then it had stripped the assets of the group and sold off different components to third parties, something that IRI itself had been prohibited from doing.

The Bertolli oil business, which was the best part of the conglomerate, was resold to Unilever in a revolving door transaction: Fi.Svi waited for payment from Unilever before it could pay its debt to IRI.

A lengthy investigation by a team of Neapolitan accountants under Dr Renato Castaldo concluded that Fi.Svi was a "front" for bigger commercial interests. Among the 12,500 pages of documentation that they provided to the Procura di Roma was evidence that Unilever had allegedly been pulling some of the strings before the deal went through.

Prodi had resigned from Unilever in May 1993, on the same day that he took up his post for the second time as head of IRI. But by then Unilever was interested in Bertolli oil. He had switched from the buying side of the deal to the selling side, allegedly without excusing himself or notifying the IRI council.

Prodi has stated that he was not aware that his method of privatising Cirio-Bertolli-De Rica would put Bertolli in the hands of his former paymasters at Unilever. But documents obtained under subpoena suggest otherwise.

They show that Unilever, Fi.Svi and IRI held meetings together before the transaction. Minutes of the IRI council meetings, though incomplete - and in some cases allegedly doctored, according to the Castaldo investigation - are extremely revealing. They state that the role of Unilever in the transaction was to be kept "invisible".

Documents gathered by Italian police from the Unilever offices in Milan show a stream of traffic on the subject. A memo from Goldman Sachs (London) to Unilever (Milan), dated Aug 24, 1993, marked "strictly confidential" discusses the deal in depth and states under the rubric Next Steps: "Fi.Svi is going to call Prodi in order to have full support in this discussion with Unilever."

Although there is no suggestion that Unilever broke any laws, documents show that the firm was careful to disguise its role in the operation. A file note dated 25-11-93, says: "Strictly Private -- the IRI/Fi.Svi/Unilever triangle is in a delicate state of 'unofficial' contacts."

Prodi's lawyers have been skilful in shifting the focus of the Italian press from whether or not he colluded in a dirty deal with Fi.Svi and lied about it to the cloudier issue of the sale price. The Castaldo investigation concluded that Cirio-Bertolli-De Rica was sold for less than half its value, costing the Italian state over 400 billion lire. But a second panel of experts picked by the judge in the case, Edoardo Landi, concluded that the price was within acceptable bounds. There were no better offers and Prodi needed a quick sale to rescue IRI from submerging in debt.

On that basis, Judge Landi closed the case before it went to trial. It is hard to know if he was justified in doing so. While snippets of the 700-page report have been leaked, the full text has not been made public. The Telegraph was denied access to all the case documents by court authorities in Rome, including the ruling of the judge. A veil of secrecy has been drawn over the case.

Dr Geremia, the prosecutor, is now in professional exile in Sardinia, the Italian equivalent of the Outer Hebrides. She refused to discuss the matter. "I wanted to let my case speak for itself in court," she said. "I was not given the chance."

Nomisma

When Prodi was first appointed president of IRI in November 1982, he did not sever his relationship with a private economic research company called Nomisma, which he had founded in his home town of Bologna a year earlier. He continued to serve as the head of Nomisma's scientific committee, seemingly a peripheral part of the business, but in fact the "dominant structure", according to a judge's ruling.

He also brought Nomisma's chief rain-maker with him, installing him as head of research at IRI, yet allowing him to continue doing Nomisma business on the side. While the two men held these dual positions, allegedly without informing the IRI council, a number of substantial contracts were granted to Nomisma by IRI subsidiaries, and other agencies of the Italian state. In other words, they were indirectly awarding contracts to themselves.

This traffic led to censure by the Financial Tribunal (Corte dei Conti), and to complaints to the criminal authorities by members of IRI's staff.

A lengthy investigation of Prodi by the Procura di Roma led to the criminal prosecution of two senior government officials and three members of Nomisma. Prodi himself was absolved in December, 1988, on the grounds that the charges against him did not "reach the extreme of a crime".

Essentially, Prodi got off on a technicality. The heads of Italy's four big state-holding companies were not categorised as public officials so Prodi, therefore, had not abused his power. He was fortunate. In the "Mani Pulite" scandals that were to follow, future heads of IRI would indeed be treated as public officials. The ruling, by Judge Mario Antonio Casavola, includes some blistering criticisms of Prodi's behaviour and management style.

It described a revolving door culture between IRI and Nomisma. There was "no doubt" that IRI research contracts negotiated by Prodi's right-hand man were generated for the purpose of creating business for Nomisma.

Some of the research projects were of "scarce utility". Once completed, "it seems that they were neither read nor used". A series of country studies commissioned by the Foreign Ministry, "were superficial, outdated, copied from obvious public sources such as geographic encyclopedia".

The judge concluded that there had been a conspiracy to channel money through that mechanism to Nomisma. But there was no evidence to link Prodi, personally, to illegal dealings by other members of Nomisma.

Nomisma came under scrutiny again in 1996, in connection with alleged over-billing and fraud in the award of a huge research contract by the state railway.

The prosecutors homed in on Prodi after a wiretap in an organised crime case picked up gossip about an alleged 3.8 billion lire pay-off to Prodi through Nomisma but the prosecutors soon concluded that the lead was not worth pursuing. Although this second investigation of Nomisma is still technically open, it no longer poses a threat to Prodi. Legally, he is now as clean as whistle.

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