Reuters | May 19, 2017 03:12PM ET
By Emilio Parodi
MILAN - Italian investigators have seized documents from the Milan offices of International Business Machines (NYSE:IBM) Corp as part of an investigation into allegations of fraud at one of its customers, BT Italy, a unit of Britain's BT Group (LON:BT), sources said.
Dozens of tax police visited the Italian offices of nine suppliers to BT Italy, including the U.S. tech group, on Thursday, as well as BT Italy's own headquarters, and took boxes of documents away, said sources familiar with the probe.
IBM spokesman Alessandro Ferrari (NYSE:RACE) said the company was cooperating with authorities.
The U.S. group is not formally under investigation and none of its representatives has been accused of wrongdoing, but the warrant for Thursday's seizures, seen by Reuters, states that some transactions between BT Italy and its suppliers were faked.
The warrant authorized the search for evidence in relation to allegations that former BT Italy managers had conspired with suppliers and customers to fake orders and to issue false credit notes in order to reduce BT Italy's costs.
Investigators also sought evidence that BT Italy and suppliers contrived sale-and-leaseback transactions to artificially boost sales and profit margins. These transactions involved several firms, including IBM, according to the warrant and the sources.
The accounting scandal surfaced last October when BT Group said it had discovered accounting errors at its Italy unit. In January, it characterized it as improper accounting and took a write-down of around 530 million pounds ($690 million).
In March, it filed a criminal complaint with Italian prosecutors, accusing several former Italy executives and other employees of breaking company rules and unlawful conduct.
BT Group said in an emailed statement: "We've been proactively assisting prosecutors in Milan with their investigations into the inappropriate behavior that took place at BT Italy."
BT Italy's lawyer, Marco Calleri, declined to comment.
Milan prosecutors this week formally put under investigation five former executives and employees of BT Italy, on allegations that they ran a conspiracy to fake transactions in order to inflate BT Italy's financial performance.
Sources said the motive was to ensure executives and staff met their bonus targets.
The five are former BT Italy chief executive Gianluca Cimini, former chief operating officer Stefania Truzzoli, former chief financial officer Luca Sebastiani, ex-employee Giacomo Ingannamorte and Sebastiani's predecessor, Alessandro Clerici.
A lawyer for Truzzoli declined to comment. Cimini did not respond to a request for comment. Lawyers for the others also did not respond.
The other suppliers raided were T.A.I. Software Solution Srl, ITF Srl, Var Group Spa, NSR Srl, Servizi Tecnici per l'Elettronica Spa, Gomedia Srl, L.B. Srl and Shicon Europe Srl, according to the warrant.
ITF and Var Group declined to comment. There was no immediate response to emailed requests for comment from T.A.I. Software Solution and Servizi Tecnici per l'Elettronica.
Reuters was unable to immediately reach L.B., Shicon Europe, Gomedia and NSR for comment.
Written By: Reuters
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