ITALY Trends and Developments Contributed by: Francesco Isolabella and Luigi Isolabella, Studio Legale Associato Isolabella
Investigative Practice and the Milan Prosecutor’s Strategy For years, Milan and its Prosecutor’s Office have served as Italy’s main “laboratory” for investigations into multinationals and complex financial and indus - trial groups. From the early 2000s cases, such as Par - malat, to more recent probes involving international banks, Milan remains at the forefront. Current inquiries, one into banks and financial institu - tions (nearing conclusion) and another into logistics and fashion companies (ongoing), share common fea - tures, as outlined below. Use of presumptive, probabilistic reasoning based on statistical and behavioural indicators to build a crimi - nal case, for example: • if 100 relationship managers of a foreign bank lacking Italian authorisation frequently travel to Italy while serving its considerable Italian client portfolio, it is presumed that they operate without authorisa - tion and are therefore manifesting: (a) unauthorised financial activity (violating Article 166 TUF); (b) a clandestine and unauthorised permanent establishment; (c) undeclared taxable income (tax evasion); and (d) possible money laundering or self-laundering; • if a logistics company relies almost exclusively on single-client subcontractors who fail to pay VAT (which is anyway paid by the company) or social contributions, it is presumed that the activity con - stitutes illegal labour supply rather than genuine contracting, implying false invoicing and unlawful VAT deductions. Application of Decree 231/2001, of ne bis in idem, of tax settlement mechanisms with the Revenue Agen - cy, and of mandatory organisational and compliance reform. A substantially presumptive/probabilistic approach (undoubtedly favoured by similar operational con - texts that represent potential repetitions of the same offences ascertained in the initial investigations on a sample basis), through which the Prosecutor:
• requests precautionary seizures of allegedly evaded taxes (in case of banks or financial compa - nies operating in Italy without authorisation) or VAT (in case of logistics and fashion companies), often amounting to tens of millions of euros; and • in the more severe cases also involving labour exploitation, use of judicial seizure pursuant to articles 20, 30 and 34 of the Anti-Mafia Code (intro - duced by Legislative Decree 159/2011), resulting in a stricter and more complex procedure than the one provided by Legislative Decree 231/01 (albeit similar in its grounds), providing court-appointed administrators managing companies until the company has fully reviewed and restructured its activities and organisation, radically overhaul - ing its organisational models and its compliance. This solution is embedded with a risk of incurring significant reputational, operational and financial damages. Corporate responses involving internal due diligence on governance and organisation, to identify and cor - rect operational flaws, enhance the control systems, and reform governance, organisation, and personnel. A further strategic element has been the deliberate and strategic separation of corporate and individual liabilities – an approach consistent with, though not mandated by, Decree 231/2001. Separating Natural and Legal Persons: Practice and Grounds This strategy serves several purposes: • to protect natural persons more than corporations, which are seen as objectively more dangerous to society and thus as the main focus of investiga - tions; • to facilitate deeper scrutiny of corporate structures since: (a) companies offer a wider scope of investigation; (b) a company may be convicted even when the physical perpetrator has not been identified; (c) corporations have greater financial capacity; (d) they can reform structures that affect public welfare; and (e) their staff (if not suspects) may serve as wit - nesses;
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