US embassy cable - 04ROME1066

UNCLAS ROME 001066 
 
SIPDIS 
 
 
DEPT FOR EUR/WE, EUR/ERA, EB/IFD/OMA 
TREAS FOR OASIA HARLOW, STUART 
FRANKFURT FOR WALLAR 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, ETRD, IT 
SUBJECT: ILLEGAL MONEY TRANSFERS AT ONE OF ITALY'S 
LARGEST ASSET MANAGEMENT COMPANIES 
 
REF: C. ROME 978 
 
B. ROME 790 
A. ROME 184 
 
1.  ITALIAN TAX POLICE ARE INVESTIGATING 97 EMPLOYEES AND 
NINE CLIENTS OF BANCA FIDEURAM FOR UNAUTHORIZED FINANCIAL 
ACTIVITIES, PRIMARILY ILLEGAL MONEY TRANSFERS TO 
SWITZERLAND.  BANCA FIDEURAM IS AN ASSET MANAGEMENT 
COMPANY PROVIDING INVESTMENT ADVICE AND PERSONAL 
FINANCIAL SERVICES, 75 PERCENT-OWNED BY SANPAOLO IMI, 
ITALY'S THIRD LARGEST BANK.  BANCA FIDEURAM, WITH 4,650 
EMPLOYEES, 800,000 CLIENTS, AND TOTAL ASSETS OF ABOUT 
55.8 BILLION EURO, IS ITALY'S SECOND LARGEST PRIVATE 
INVESTMENT BANK.  POLICE ARE CONDUCTING ABOUT 200 
SEARCHES THROUGHOUT ITALY, BUT MAINLY IN NORTHERN ITALY, 
AS PART OF AN INVESTIGATION ORDERED BY FLORENCE 
PROSECUTORS. 
 
2.  BANCA FIDEURAM EMPLOYEES HAVE ALLEGEDLY TRANSFERRED 
FUNDS FROM ILLEGAL ACTIVITIES FROM ITALY TO SWITZERLAND 
AND THEN BACK TO ITALY THROUGH FIDEURAM BANK SUISSE.  THE 
TRANSFERS NOT ONLY CONCEALED THE SOURCE OF THE FUNDS FROM 
POLICE AUTHORITIES, BUT ALSO HID THE INCOME GENERATED 
FROM THE ILLEGAL ACTIVITIES FROM TAX AUTHORITIES.  THE 
TRANSACTIONS APPARENTLY TOOK PLACE WITHOUT KNOWLEDGE OF 
FIDEURAM'S MANAGEMENT.  ACCORDING TO ITALIAN TAX POLICE, 
THE TOTAL AMOUNT OF FUNDS ILLEGALLY TRANSFERRED EQUALLED 
SOME 4 TO 5 MILLION EUROS.  OTHER SOURCES ESTIMATE 
    ILLEGAL TRANSFERS OF 23 MILLION EUROS. 
 
3.  POLICE SUSPECT THAT BANCA FIDEURAM EMPLOYEES, RISKING 
UP TO FOUR YEARS OF JAIL, FIRST CHARGED CLIENTS USURIOUS 
FEES (5 TO 20 PERCENT OF THE AMOUNT OF UNDECLARED FUNDS) 
TO TRANSFER THE FUNDS ABROAD.  THEN, TAX POLICE SUSPECT, 
BANCA FIDEURAM EMPLOYEES HELPED THESE SAME CLIENTS 
REPATRIATE THE FUNDS DURING THE TAX AMNESTY THE ITALIAN 
GOVERNMENT OFFERED IN THE PAST TWO YEARS. 
 
4.  BANCA FIDEURAM HAS ISSUED A STATEMENT THAT ITS 
ACTIVITIES IN ITALY, AND THOSE OF ITS FOREIGN AFFILIATES, 
FULLY RESPECT ITALIAN LAW AND THAT THE BANK WOULD 
COOPERATE WITH INVESTIGATORS.  ALTHOUGH THE CASE INVOLVES 
ONLY 97 OF SOME 4,650 EMPLOYEES, THE INVESTIGATION OF 
BANCA FIDEURAM EMPLOYEES HAS REVERBERATED ON THE BANK 
ITSELF, WITH A SEVEN PERCENT DROP IN SHARE VALUE IN TWO 
DAYS. 
 
5.  BANCA FIDEURAM HAS NO U.S. OFFICE; BUT SANPAOLO IMI, 
THE PARENT COMPANY, HAS BRANCHES BOTH IN NEW YORK AND LOS 
ANGELES. 
 
COMMENT 
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6. THE BANCA FIDEURAM CASE FOLLOWS THE RECENT CASES OF 
ALLEGED FRAUD, E.G., THE FOOD GROUPS CIRIO AND PARMALAT 
(REFTEL C); BUT THERE THE SIMILARITIES END.  THESE FRAUDS 
LED TO BANKRUPTCY AND CAUSED LOSSES TO ALMOST 170,000 
SAVERS, WHICH, IN TURN, SERIOUSLY AFFECTED PUBLIC 
    CONFIDENCE, WITH REPORTS OF ITALIAN SAVERS' CONFIDENCE IN 
THE FINANCIAL SYSTEM AT A HISTORIC LOW (REFTEL B).  IN 
THE CIRIO AND PARLALAT CASES, THE VICTIMS IN ITALY WERE 
MOSTLY SMALL INVESTORS, WHILE IN THE FIDEURAM AFFAIR - IF 
PROSECUTORS ARE CORRECT - THE VICTIM IS THE BANK ITSELF, 
SINCE INVESTORS ASKED BANK EMPLOYEES TO COMMIT ILLEGAL 
TRANSACTIONS WITHOUT KNOWLEDGE OF FIDEURAM'S MANAGEMENT. 
END COMMENT. 
 
SEMBLER 
 
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 2004ROME01066 - Classification: UNCLASSIFIED