Former Bank of Italy governor Antonio Fazio on Tuesday denied judicial reports that he agreed to issue favourable reports of state accounts in return for Premier Silvio Berlusconi's word he would retain his life mandate.
"I deny (having made) any agreement or pact with Premier Silvio Berlusconi," said Fazio, stressing that the reports were "obviously false and clearly belied by the stances on state accounts taken by the Bank of Italy" since 2001.
Berlusconi - whose coalition narrowly lost this week's general election - called the reports "completely groundless," adding that he had asked his lawywers to press charges.
Fazio was forced to resign in December after it emerged he encouraged a bid from a small northern Italian bank, Banca Popolare Italiana (BPI), for another Italian lender Antonveneta, thwarting rival bidder ABN Amro. BPI's bid sank last year amid allegations it had been unfairly favoured by Fazio, and that its former head, Gianpiero Fiorani - a personal friend - had been the mind behind numerous illegal financial operations. ABN Amro eventually won the bid.
Fiorani, who was arrested in December on charges of embezzlement and market rigging, was released from jail on Monday by prosecutor Clementina Forleo and placed under house arrest.
During his four months in a Milan jail Fiorani agreed to 'cooperate' with prosecutors, supplying them with 'insider information' on the case.
Fazio, who is also being probed by Forleo, rejected claims he knew that Fiorani had given kickbacks to a string of politicians to gain support for his takeover of Antonveneta. The former governor said he told Forleo he was not told of kickbacks and specifically those allegedly made to Northern League MP Aldo Brancher.
"In fact, if you read the transcripts of the conversation (with Forleo) it's clear that I said exactly the opposite," Fazio said.
On Monday, Milan prosecutors said they were investigating a senator in Berlusconi's Forza Italia party in connection with the case.
Investigators opened a file on Senator Luigi Grillo aspart of an existing probe into allegations that leading banking and political figures sought to block ABN Amro's attempt to buy shares in Italy's Antonveneta Bank. Milan prosecutors believe Fiorani built up an extensive network of friends in business, finance and politics who protected him and sometimes benefited from the illicit
operations of which he is accused.
According to revelations by the former banker, Grillo helped lobby for the BPI deal among senior political circles.
Legal sources said Fiorani told prosecutors that in 2004 he allegedly paid Grillo 200,000 euros to thank him "for supporting Fazio and to fund his political efforts." The sources said Fiorani told prosecutors that half this amount was to be given to Marcello dell'Utri, another Forza Italia senator.
However, they said the prosecutors had shelved this lead because Fiorani had not convinced them fully of dell'Utri's involvement.
Dell'Utri, a long-time aide of Berlusconi who played a major role in creating Forza Italia in the early 1990s, has been convicted for tax fraud and false accounting in connection with the premier's advertising company Publitalia. He is currently appealing a nine-year sentence for Mafia association.
The sources said Fiorani had told prosecutors that thanks to Grillo he had met Berlusconi on three occasions - once at the premier's villa in Sardinia - to discuss his banking projects.
They said Fiorani also reported that Cesare Previti, Berlusconi's former lawyer and an MP with his party, had asked him to hire his son or give him a consulting job with BPI.
Grillo, who also put 25,000 euros of his own cash into the Antonveneta takeover deal, denied any wrongdoing on Monday, insisting he had only done what he thought was best for the country.
"Italy is a 'bankocentric' system, meaning that banks play a major role in our economy," he said. "Creating a large credit institute that was purely Italian was one way of protecting Italy from the monopoly of foreign capital". He said he was not worried about the outcome of the investigation, which he suggested Milan prosecutors had opened for "political purposes".
According to the report accompanying Fiorani's house arrest warrant, Fazio was keen to preserve his life-long governor's mandate in order to "manoeuvre the (Italian) banking system at will."
To do so, "he constantly kept company with important politicians from whom he gained unconditioned protection," the report said. According to Forleo, Fazio and Fiorani met regularly at least every week - mainly on Saturdays - to discuss BPI's bid.
Fazio believed that the bank could serve as a linchpin for further mergers with Italian banks and consequently thwart foreign competitors.
