Rooting Out Corruption

Rooting Out Corruption 

By Niccolò Vivarelli

It turned into the largest corruption scandal in Europe since World War II and rocked the Italian establishment to its foundations.

A small local sting operation in Milan in 1992 mushroomed into a nationwide probe revealing an intricate web of all-pervasive corruption. Kickbacks and bribes were found to be the accepted way of doing business at all levels of government and private enterprise. By mid-1993 the investigation had implicated almost one-third of Parliament, forced six cabinet ministers to resign, and precipitated the fall of a political order in place since 1946. In the course of the year executives of virtually every major private and state-owned Italian company were either arrested or indicted. Bribe taking was discovered within the judiciary. The press came under public suspicion, as did the Vatican. By late in 1993, allegations had been made against over 3,000 politicians, business executives, and civil servants, of whom almost a third had been arrested or were under investigation, causing such a backlog in the courts that, it was estimated, the trials might not be concluded for a decade. Ten of those accused had committed suicide.

How It Started

The snowball got rolling in Milan, the country's financial capital, on February 17, 1992, with a sting devised by investigating magistrate Antonio Di Pietro. Di Pietro equipped Luca Magni, the exasperated owner of a small cleaning company, with a concealed video camera, which was rolling as Magni handed a kickback of 7 million lire (around $4,500 at the rate of exchange on June 30, 1993) to Mario Chiesa, the director of a municipal retirement home, who had demanded the cash in exchange for a cleaning contract. Chiesa, a locally prominent Socialist Party official who had previously collected much larger bribes in Milan, later received a six-year prison sentence. Once behind bars he agreed to a plea bargain and began to talk. Within three months Di Pietro and a group of three other magistrates, nicknamed Mani Pulite, or Clean Hands, had arrested more than a dozen city employees and were investigating dozens more, including two former mayors of Milan and Severino Citaristi, the national treasurer of the Christian Democrats, Italy's largest political party. Alleged illegal payments ranged from millions of dollars paid by construction companies to participate in the construction of Milan's new subway to a few hundred dollars demanded for a license to build a family tomb at a cemetery.

Political Fallout

Meanwhile, inconclusive general elections held in April 1992 had weakened the four-party coalition led by Prime Minister Giulio Andreotti, a Christian Democrat serving for his seventh time as prime minister. Pressured by the European Community, the elder statesman was struggling to reduce a national debt of more than $1 trillion, which exceeded the country's gross domestic product. According to one study, a sum amounting to roughly a tenth of that debt, $100 billion, had been funneled to the coffers of the leading political parties since 1980 through a system of exchanging padded contracts for kickbacks. After the April elections Andreotti was succeeded by Socialist Giuliano Amato.

According to Clean Hands magistrate Piercamillo Davigo, "the system went bust because the money ran out." As the magistrates' probe implicated businessmen choked by demands for higher cuts on increasingly meager government contracts, the great majority confessed and turned in their partners in crime. The year after Chiesa's arrest saw high-ranking officials of all government parties forced to resign. Public disgust with the political status quo became so impassioned that police put steel fences around Parliament to keep politicians from being heckled and spat on by angry citizens. Di Pietro became a national hero.

One of the foremost politicians investigated was former Socialist Party Secretary-General Bettino Craxi. He was accused, among some 50 alleged offenses, of being involved in the Milan subway scandal. Parliamentary immunity protecting him from prosecution on the most serious charges was lifted in August 1993. In June, in a separate probe, fellow senators lifted Giulio Andreotti's immunity from prosecution so that Sicilian investigators could look into allegations by several Mafia informers that he had acted as the Mafia's emissary in Rome. Andreotti called the charges ridiculous. However, he was also being investigated in connection with illegal party financing. Subsequently, an inquiry began into allegations that he had ordered the murder in 1979 of a journalist, Mino Pecorelli. It was said that Pecorelli had tried to blackmail Andreotti over the murder in 1978 of former Prime Minister Aldo Moro. In October the Senate vote resulted in the abolition of immunity from prosecution for all of the members of Parliament, though they remained shielded from incarceration.

Corporate Wrongdoing

By mid-1993, Clean Hands had uncovered evidence of corruption at the highest levels of Italian industry. Executives at some of the nation's top companies, such as Fiat, Ferruzzi, and Olivetti, had been either arrested or indicted. After ten Fiat managers were taken into preventive custody and charged with corruption and illicit party financing, the automaker, Italy's largest private corporation, issued a code of business ethics setting strict rules on dealings with politicians and civil servants. Chairman Giovanni Agnelli admitted that Fiat had paid bribes but claimed he had not been told about them at the time.

Not all industrialists tainted by corrupt dealings were in the private sector. On May 12, police arrested Franco Nobili, chairman of the state heavy-industry board, Istituto per la Ricostruzione Industriale, on charges of corruption and illegal party financing. In Milan's San Vittore jail, where he was held in preventive custody, Nobili joined Gabriele Cagliari, former head of the national energy group Ente Nazionale Idrocarburi (ENI), among dozens of other executives. Meanwhile, Carlo De Benedetti, chairman of computer and business machine giant Olivetti, voluntarily admitted to Di Pietro that during the late 1980s he had authorized payment of 10 billion lire ($6.5 million) in bribes to government officials in order to sell computers to the Post and Telegraph Ministry.

De Benedetti was the highest-profile figure in the private sector to be charged in the Clean Hands probe. In November the Rome magistracy issued an arrest warrant to place him in preventive custody on the grounds that he had not told Di Pietro the whole story and might tamper with evidence before trial. After three days in hiding De Benedetti turned himself in; he was placed under house arrest and then released, reportedly after agreeing to provide further information.

Judicial Abuses?

As the scandal grew beyond anyone's expectations so did the number of defendants awaiting trial in Italy's backlogged courts. It was clear that venality in all its forms had been the way of life for huge sectors for the populace. This led to periodic calls for an amnesty, some even from magistrates, and in March, Prime Minister Amato tried to push through a bill decriminalizing corruption. A public uproar forced him to back down. The accumulation of untried cases, however, raised the question of whether investigating magistrates, who kept suspects locked up in preventive custody for months, were abusing their powers, making Italy a "republic of magistrates."

The issue took on dramatic overtones on July 20, when Cagliari, the former ENI president, suffocated himself with a plastic bag in his cell at San Vittore. Cagliari had been in preventive custody for 133 days. Three days later Raul Gardini, former president of Ferruzzi Finanziaria, ended his life with a gunshot to the head, just as a warrant was reportedly being issued for his arrest. Cagliari and Gardini became the ninth and tenth suicides attributed to the Clean Hands probe.

Worst Rot Uncovered

Cagliari and Gardini were the main protagonists of the scandal's grandest scam, known as the Enimont affair. Enimont was a joint venture in chemicals between ENI and Montedison, which was owned by Ferruzzi. When it was formed in 1988, Enimont was hailed as a model of public and private collaboration. It went sour in 1990, and, after a bitter takeover battle between Cagliari and Gardini, ENI bought Montedison's 40 percent stake in Enimont for the equivalent of $2.5 billion (at 1990 rates), an extremely bloated price according to investigators and analysts. In recompense for such generosity Gardini allegedly paid to the parties in the coalition government close to $100 million, dubbed by the press "the mother of all kickbacks." About half of that sum was allegedly deposited at the Institute for Religious Works, the Vatican's main bank, which came under suspicion of having itself funneled some of the Ferruzzi payoffs to the parties.

In July, Clean Hands delved into Italy's health care system, blowing the lid on kickbacks allegedly paid by pharmaceutical companies, notably to Francesco De Lorenzo, who had resigned as health minister in February 1993 as a result of his suspected involvement in a vote-buying scandal and of his father's arrest on corruption charges. The kickbacks were said to be bribes paid to De Lorenzo and other officials to raise the government-regulated prices of medicines. Clean Hands also cast doubt on the integrity of the press, as Sergio Cusani, a close associate of Gardini's at Ferruzzi, alleged in September that Gardini had paid off some of the best names in Italian journalism. (Cusani himself went on trial in October, having been accused of participation in the Enimont affair.)

A Peaceful Revolution

Italian voters registered their outrage in an April 1993 referendum, passing by an overwhelming margin an electoral reform measure. Instead of parties filling local and national posts with their chosen candidates, as had been the case under the previous proportional representation system, most elective offices would now go to candidates elected by direct ballot. The scandal thus gave what many considered a fatal blow to a system of pork barrel politics that had been held in place by the cold war. The shake-up was so profound it was dubbed a peaceful revolution. Before the fall of the Berlin Wall [1989], non-Communist Italian voters had had little choice but to support the same four or five parties in a succession of short-lived coalition governments that could act as bastions against Italy's Communist Party, once the largest in the West. With Communism no longer a threat, Italians could chose their leaders according to more specific criteria. A popular one became a candidate's honesty.

About the author: Niccolò Vivarelli is a special correspondent for Newsweek, based in Rome.

Source: Collier’s Year Book, 1994.

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