Italy - The Strategic View - Business Crime 2016
        

Roberto Pisano provides an overview of investigations for domestic and international corruption, tax fraud and money laundering, freezing and confiscation of alleged proceeds of crime

Contributing firm

1. What trends, in terms of activity or focus, have you seen in the prosecution of business crimes in your jurisdiction in the last 12 months?

The investigation and prosecution of business crimes has consistently increased in recent years, and this trend was also confirmed in the last 12 months.

The main focus was certainly on the criminal offences of corruption (both domestic and international), money laundering and tax fraud/tax evasion, with frequent application at a pre-trial stage of the freezing of the alleged “proceeds of crime” (or of assets for an equivalent value), in view of their future confiscation.

In that respect, it should be noted that only public prosecutors are responsible for the investigation and prosecution of criminal offences, including business crimes, either of individuals or of corporations, and that they are not part of the government but are professional magistrates.  In particular, if they assess that a “notice of crime” against a certain suspect is grounded, they have a duty to bring a criminal prosecution (which is therefore compulsory and not discretionary; see question 7).   

2. Are enforcement agencies particularly focused on any specific industries or crimes?

Certainly there is a focus, first of all, on tax violations allegedly committed by foreign multinationals, especially with respect to the allegation of not having reported in Italy profits relating to activities carried out in the Italian territory, through a so-called hidden permanent establishment.  Criminal investigations are currently pending against the officers of a number of foreign multinationals and their Italian subsidiaries (such as Apple, Google, Amazon, etc.), for the offence of failure to file a tax return (article 5 of Legislative Decree no. 74/2000), and tax assessments are pending against the relating entities for the corresponding, alleged tax violation.

Another area on which prosecuting authorities are particularly focused is the one of the criminal offences of corruption and money laundering, with respect to both individuals and corporations.  Indeed, in relation to corruption and money laundering, as well as for most of business crimes, both individuals and corporations can be held criminally liable, on the condition that specific requirements are met.

In particular, in order for a corporation to be held responsible, it is necessary that the relevant offence was committed in the interest or for the benefit of the corporation by its managers or employees (Legislative Decree no. 231/2001; article 5).  The corporation’s responsibility is qualified by the law as an “administrative offence”, but the matter is dealt with by a criminal judge in accordance with the rules of criminal procedure, in proceedings which are usually joined with the criminal proceedings against the corporation’s officers.

In the last 12 months the investigation and prosecution of corruption offences has intensively continued, in relation to both domestic and foreign corruption. 

As far as domestic corruption is concerned, the main investigations and prosecutions related to the Lombardy region case, the Expo 2015 case, and the Mafia Capitale case, respectively conducted by the Milan (the first two) and the Rome Prosecution’s Office.  They, in essence, concern allegations of obtaining money or other benefits by local public officials, in exchange for unlawfully granting public health care funds, or for unlawfully altering the adjudication of public tenders. 

With respect to the corruption of foreign public officials (international corruption), the main investigations and prosecutions targeted Italian multinationals and their officers, in relation to the alleged unlawful adjudication of public tenders or licences in a foreign country, in exchange for the alleged payment of bribe, especially through local agents, to the foreign public officials.  The main investigations or prosecutions are currently pending against the Italian corporations Eni Spa, Saipem Spa and AgustaWestland Spa, and their managers, in relation to the adjudication of licences or public tenders in Nigeria and Algeria.  In particular:

  • with respect to Nigeria, in November 2013 the Milan Prosecution’s Office started a criminal investigation against the company Eni Spa, its top managers, the former Minister of Petroleum of Nigeria and some Italian and foreign individuals, in relation to the alleged offence of corruption of Nigerian public officials, in connection to the granting in 2011 by the Nigerian government to the subsidiaries of Eni and Shell of the oil-prospecting licence of an oil field located in the offshore territorial waters of Nigeria.  In the course of 2016 the foreign corporation Shell was also added as suspect to the investigation.  The proceeding is still in the investigative stage, and it is expected that in the second half of 2016 the prosecuting authorities will conclude the investigations and will request the committal for trial for some of the suspects;      
  • with respect to Algeria, in the past years the Milan Prosecution’s Office started a criminal investigation against the corporations Eni Spa and Saipem Spa, some of their top managers and foreign agents, in relation to the alleged offence of corruption of the former Minister of Energy of Algeria, with respect to the adjudication of public tenders in Algeria in the period 2007–2010.  On October 2, 2015, Saipem Spa and its top managers, and the foreign agents, were committed to trial for the offences of international corruption and tax fraud, and the trial is currently pending before the Milan court of first instance.  On the same date, on the contrary, Eni Spa and its top officials were acquitted from all charges, but the acquittal was subsequently quashed by the Court of Cassation on February 24, 2016, further to an appeal made by the Prosecution’s Office.  A new decision on the committal for trial of Eni and its managers will be taken in the second half of 2016; and    
  • with respect to Algeria, in 2015 the Prosecution’s Office of Varese started an investigation against the corporation AgustaWestland, and its managers, in relation to the alleged offences of international corruption and tax fraud, in connection with the awarding of a public tender for the supply of helicopters to the Algerian government. 

 

Furthermore, in the course of 2016:

  • the corporation SnamProgetti (incorporated in Saipem in 2006) has been finally convicted by the Italian Court of Cassation, on February 12, 2016, in relation to charges of corruption of Nigerian public officials for the Bonny Island case, in connection with the awarding of gas supply contracts to the consortium Tskj in the period from 1994 to 2004; and
  • the former top managers of Finmeccanica and AgustaWestland have been convicted by the Court of Appeal of Milan, on April 7, 2016, in relation to charges of corruption of Indian public officials (and tax fraud), in connection with the awarding of a public tender for the supply of 12 helicopters to the Indian government.  The appellate proceeding before the Court of Cassation is expected to take place in the course of 2017.    

 

3. Are enforcement agencies more or less focused on pursuing cases against corporations or individuals?

They are focused on pursing cases against both, as explained in question 2.  With respect to the responsibility of corporations, it is worth noting that, where the offence is committed by an “employee” of the corporation, the latter can avoid liability by proving to have implemented effective “compliance programmes” designed to prevent the commission of that type of offence (article 7 of Legislative Decree no. 231/2001). 

Where the offence is committed by “senior managers”, the implementation of effective “compliance programmes” does not suffice, and the corporations’ responsibility is avoidable only by proving that the perpetrator acted in “fraudulent breach” of corporate compliance controls (article 6 of Legislative Decree no. 231/2001). 

4. Does the legal framework concerning the prosecution of business crimes allow for extraterritorial enforcement?  Are such matters being pursued?

The general governing principle is the territoriality one, according to which Italian courts have jurisdiction on all offences considered committed within the Italian territory: namely, when at least a segment of the prohibited conduct, or the event, take place in Italy, regardless of the nationality of the offender (article 6 of the Italian Criminal Code).  This principle suffers a derogation in favour of the “extraterritorial” jurisdiction only to a very limited extent, and under stringent requirements (presence in Italy of the suspect, request of the Italian Minister of Justice, unsuccessful extradition proceedings, etc.; see articles 9 and 10 of the Italian Criminal Code).

However, as explained in question 2, in relation to corruption offences the reach of Italian courts has been significantly extended since 2000, in such a way to include corruption of foreign public officials (including officials of the EU institutions and of EU member states), further to the implementation by Law no. 300/2000 of the OECD Anti-Bribery Convention of Paris of 1997, and of the EU Anti-Corruption Convention of Brussels of 1997.

As explained, the mentioned legal framework allows investigations and prosecutions for the corruption of foreign public officials, on the condition that at least a segment of the prohibited conduct (i.e. the decision to pay a bribe abroad) takes place in Italy.

Also with respect to other business crimes, such as tax fraud, money laundering, market manipulation, etc., the existence of the Italian jurisdiction is broadly asserted by Italian prosecuting authorities, and broadly affirmed by Italian courts, also with respect to foreign nationals and foreign residents, on the basis of the mentioned principles, and of the relating principle concerning the participation as accomplices in the criminal conduct taken in Italy by other offenders (article 110 of the Italian Criminal Code).

5. What judicial or legislative developments have impacted the prosecution of business crimes in your jurisdiction in the last 12 months?  Are there any significant proposals for reform of the legal framework that governs business crimes in your jurisdiction?

Law Decree no. 90 of June 24, 2014, has attributed significant new powers to the National Anti-Corruption Authority (ANAC), in an effort to counteract corruption by providing effective coordination and exchange of information between that body and the various prosecuting authorities investigating cases of corruption, as well as by providing the ANAC with effective powers of supervision over relevant public tenders.  

Furthermore, with respect to the criminal offence of false accounting, in the 1990s it was largely used, jointly with the one of corruption, as a tool to discover slash funds and bribery payments.  In 2002, the definition of false accounting offences was restricted, significantly reducing their sphere of application.  Law no. 69/2015, entered into force on June 14, 2015, has again broadened the definition and reach of these offences, so that a significant application of them has to be expected in the future.    

6. How common is it for enforcement agencies in your jurisdiction to exchange information and cooperate internationally with other agencies?  What are the consequences of cross-border cooperation on prosecutions of entities and individuals in your jurisdiction?

It is very common for Italian prosecuting authorities to exchange information and cooperate internationally with foreign authorities.  Mutual legal assistance with foreign countries is governed by the international treaties signed and ratified by Italy.  They include the European Convention on Mutual Assistance in Criminal Matters of 1959, the European Convention on Laundering, Search, Seizure and Confiscation of the Proceeds from Crime of 1990, the United Nations Convention against Corruption of 2003, and several bilateral treaties.  In the absence of a treaty, mutual legal assistance is governed by specific provisions of the Italian Code of Criminal Procedure.

There is no high profile criminal investigation and prosecution, against individuals and corporations, which does not include use of letters of request to foreign States: this is in order to gather relevant evidence located abroad (interviews from witnesses and suspects, acquisition of documentation, including bank accounts, and including searches and seizure at foreign premises), and in order to freeze funds held in foreign bank accounts, and other assets allegedly constituting proceeds of crime.

The challenges to the acquisition and the use as evidence of materials and evidence located abroad, by claiming the violation of the relevant procedures for mutual legal assistance, represent an unavoidable feature of the high profile criminal trials of our times.      

7. What unique challenges do entities or individuals face when enforcement agencies in your jurisdiction initiate an investigation?

As explained in question 1, where there is a “notice of crime” public prosecutors have a duty to open a formal criminal proceeding, to start investigations, and subsequently – if they assess that a “notice of crime” against a certain suspect is grounded – they have a duty to bring a criminal prosecution by requesting the committal for trial of the suspect.

The decision to issue a decree of committal for trial (“indictment”) is taken by a judge (the so-called Judge for the Preliminary Hearing) at the end of an intermediary stage of the proceeding called the Preliminary Hearing.  An indictment is issued when, in the judge’s view, the evidence gathered by the public prosecutor during the investigations can successfully support the charges in the trial.  In the negative, the judge issues a decision of dismissal.

When an investigation starts, individuals and corporations have to accurately and objectively evaluate whether their conduct (for individuals), or the conduct of their managers and employees (for corporations), can amount to a criminal offence that might be successfully proven at trial by prosecuting authorities.

Depending on this in-depth evaluation, the proper strategy of defence will have to follow.  It may consist of the denial of all allegations/charges, with the consequent need to prepare as soon as possible a coherent line of defence, supported by all relevant documentary and witness evidence.

To the contrary, it may consist of a decision to cooperate with the prosecuting authorities.  Under certain conditions, plea bargaining with prosecuting authorities is recognised by Italian law, for both individuals and corporations.  With respect to individuals, it has to be approved by the competent judge, the punishment agreed upon cannot be more than five years’ imprisonment, and the relating sentence is considered equivalent to a conviction sentence (article 445 of the Italian Code of Criminal Procedure).  With respect to corporations, a similar mechanism is available, in relation to criminal offences for which the corporate managers or employees would be entitled to plea bargaining, and in relation to other less serious violations (article 63 of Legislative Decree no. 231/2001).  

8. Do enforcement agencies in your jurisdiction provide incentives for individuals or entities to self-report a business crime or otherwise provide assistance to the government?  If so, what factors should individuals or entities consider when assessing whether to self-report a business crime or cooperate with a government investigation?

With respect to individuals, Italian law does not provide express benefits in that respect, with the exception of mafia or terrorism crimes.  However, it can be stated that, on a case-by-case basis, a certain degree of cooperation can produce positive effects, especially if joined with the compensation of damage in favour of the victim of the crime (this could qualify as one or more “mitigating circumstances”, able to reduce the future sentence).

As far as corporations are concerned, cooperation with the prosecuting authorities before trial (in terms of removal of the officers/body members allegedly responsible for the unlawful conduct, implementation of compliance programmes aimed at preventing the same type of offences, compensation of damage, restitution of the profits gained, etc.) can have a significant impact in reducing the pre-trial and final sanctions to be applied to the corporation.

In particular, in the event of “criminal responsibility” corporations are subject to sanctions constituted of fines, disqualifications and confiscation.  Disqualifications can be particularly afflictive, because they can also be applied at a pre-trial stage, as interim coercive measures, and they can consist of the suspension or revocation of government concessions, debarment, exclusion from government financing, and even prohibition from carrying on business activity (articles 9–13 of Legislative Decree no. 231/2001).

Cooperation with the prosecuting authorities before trial, in the forms mentioned above, can prevent or reduce the pre-trial disqualifications, and the ones applicable with the final sentence (article 17 of Legislative Decree no. 231/2001).

See question 7 for the crucial factors to be considered when assessing whether to cooperate with prosecuting authorities.  

9. Do enforcement agencies in your jurisdiction use non-prosecution agreements ("NPA") or deferred prosecution agreements ("DPA")?  If so, how do such agreements work in practice and what can entities or individuals do to reach an NPA or a DPA with enforcement agencies?  If not, do you believe it is likely that such agreements will become part of the legal framework in the next five years?

No, Italian law does not provide for agreements as such.  It appears unlikely that in the next five years agreements will become part of the legal framework, due to the fact that, according to the Italian Constitution (article 112), the bringing of criminal actions is compulsory and not discretionary for prosecuting authorities, if they assess that a “notice of crime” against a certain suspect is grounded.  See question 7 on the point. 

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