BT in the dock as £530m Italian fraud trial begins

BT will be in the dock today as a long-awaited trial over its £530million accounting scandal begins in Italy.

Prosecutors in Milan claim the telecom group’s Italian unit and a network of staff sought to inflate revenues and conceal losses of £250million in a sophisticated fraud.

On trial alongside the company are 20 defendants, including two former executives.

Prosecutors in Milan claim BT’s Italian unit and a network of staff sought to inflate revenues and conceal losses of £250m in a sophisticated fraud

All the accused deny charges of false accounting alleged to have been carried out in 2015 and 2016.

But the case presents another headache for BT chief executive Philip Jansen, who arrived years after the alleged incidents took place but now faces having to deal with any fallout from the trial.

A BT spokesman said the alleged fraud was ‘historic’ and confined to a small number of people in Italy.

He said: ‘Whilst we remain confident in our defence, given the ongoing proceedings, it would be inappropriate for us to comment further.’ BT was warned of trouble at its Italian division by a whistleblower in 2016, when former chief executive Gavin Patterson was still in charge.

It disclosed problems to investors in October that year, writing off £145million from BT Italia’s value due to ‘inappropriate management behaviour’.

But following a forensic review by outside accountants at KPMG, BT was forced to announce an even bigger £530million writedown in January 2017. 

It sent shares tumbling and wiped £8billion off the company’s value on its worst-ever day on the stock market.

The KPMG review, which has never been published in full, found evidence of a ‘serious breakdown of accounting processes and controls’ at BT Italia and a ‘loss of balance sheet integrity’. 

It also raised questions about how thoroughly bosses in London had scrutinised the figures before the fraud was uncovered.

BT has always argued it was an ‘injured party’ in the scandal. But in 2019 a report by Italian police alleged that London-based executives repeatedly put pressure on managers at the foreign subsidiary to hit targets and encouraged ‘aggressive, anomalous and knowingly wrong accounting practices’.

They alleged that a network of BT Italia staff inflated revenues, faked contract renewals and invoices and invented bogus supplier transactions in order to disguise the unit’s true financial performance.

Of 23 originally accused, a former manager of BT Italy has already been jailed for a year in a fast-track trial, while the ex-chief executive, Gianluca Cimini, died last year.

Among the defendants are Richard Cameron, former chief financial officer of BT Global Services.

A lawyer for Cameron, who was based in London but left BT in 2017, has insisted he ‘is in no doubt that he acted properly’ and is confident he would be cleared.

This post first appeared on Dailymail.co.uk