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ITALY: Ex-Head of Bank of Italy to Go on Trial


by ERIC SYLVERSThe New York Times
November 19th, 2008

MILAN — As head of the Bank of Italy for 12 years, Antonio Fazio helped protect the country’s banks from foreign rivals, making him popular among entrenched Italian bankers, but less so at European Union headquarters.

Now, three years after his time at the helm of the central bank ended in scandal, he goes on trial in Milan on Thursday, accused of rigging markets in order to keep Italian banks in Italian hands.

Mr. Fazio, 72, worked at the Italian central bank for 45 years and was governor until December 2005, when he stepped down in the face of political pressure from the Italian government and the European Commission, the executive arm of the European Union.

He had been under attack since July of that year, when newspapers published the transcripts of phone conversations between him and Gianpiero Fiorani, the chief executive of a bank mired in a takeover battle.

The case captivated the Italian public as well as the country’s political and economic elite. Mr. Fazio had a lifetime appointment as head of the central bank and a personal veto on all bank mergers in Italy.

His power remained unfettered until he used it — illegally, prosecutors say — to favor the takeover of Banca Antonveneta by Mr. Fiorani’s bank, Banca Popolare di Lodi. At the time, the Dutch bank ABN Amro was seeking to buy Banca Antonveneta.

After Mr. Fazio’s resignation, ABN Amro eventually bought Banca Antonveneta, although the bank was soon under Italian ownership again when it was subsequently sold to Monte dei Paschi di Siena.

Experts say Mr. Fazio’s trial breaks new ground in the realm of Italian finance.

“This is really the first time in Italy that somebody at this high of a level has been charged with something this serious,” said Alberto Alessandri, a law and finance professor at Bocconi University. He is representing the bank, now called Banca Popolare Italiana, in the trial.

The trial opened in October, but the judge suspended it until Thursday to consider a motion by the consumer association Adusbef, which is asking that the central bank and the Italian market regulator pay damages of 10 million euros for their lack of oversight.

Mr. Fazio could be sentenced to as many as 12 years if he is convicted, although legal specialists said a guilty verdict would probably not lead to any actual prison time.

“The result of the trial will be fair and presumably severe, but the problem is the execution of the penalty,” Mr. Alessandri said. “He is old, and it is problematic to send somebody of that age to jail in Italy.”

As part of a plea bargain, Mr. Fiorani has collaborated with investigators. But the transcripts of the telephone conversations between the two men seem to pose the most serious challenge to Mr. Fazio’s defense.

“I just put my signature on it,” Mr. Fazio was recorded as telling Mr. Fiorani in July 2005 in a midnight phone conversation regarding the final approval of the takeover of Banca Antonveneta.

Mr. Fiorani replied, “I’ve got goose bumps,” and added, “I’d give you a kiss right now, on the forehead.”

Mr. Fazio could not be reached for comment and has not spoken to the news media for three years. Seventeen other people are on trial in connection with Popolare di Lodi’s failed assault on Antonveneta, and 58 have reached plea agreements.

“Economic crimes like these are extremely complex when you drill down, and it is very difficult to prove guilt even when there is what seems to be irrefutable evidence,” said Gabrio Forti, a professor of criminal law and criminology at Università Cattolica in Milan.

The trial will probably last for at least a year, according to several legal specialists.

Though experts agree that Mr. Fazio protected Italian banks from takeovers by foreign rivals, the dispute is over whether he used illicit means to achieve his goal.

The trial promises to offer much theater, with the list of witnesses submitted by the prosecutors including Mr. Fazio’s successor, Mario Draghi, and Cesare Geronzi, chairman of the investment bank Mediobanca and one of the most powerful figures in Italian finance.

As governor of the Bank of Italy, Mr. Draghi has taken an antiprotectionist stance, encouraging bank consolidation and removing barriers to foreign takeovers. His actions led the European Commission to drop its complaint against Italy for hindering takeovers by foreign banks.

Mr. Fazio, meanwhile, has begun efforts to rehabilitate his reputation. At the end of October he wrote an editorial for Il Sole/24 Ore, the Italian financial newspaper, in which he laid out the main thoughts of his just-published book, “Globalization, Political Economy and Social Doctrine.”

Mr. Fazio, who was himself a regulator without any oversight, has argued in the past for the need for more regulation. Unwittingly, he might have achieved just that.

“Both this scandal and lesser scandals have led to more oversight by regulators,” Mr. Forti, the criminal law professor, said. “Fazio has certainly seen his image damaged, but not as much as would have happened in other countries because of cultural reasons and also because in recent years the Italian judiciary has been accused of carrying out politically motivated trials. Even though it’s a false accusation most of the time, it has contributed to lessening the weight of guilty verdicts.”





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