Exclusive: Italy tax police seize documents from IBM in BT Italy probe

Fri May 19, 2017 2:20pm EDT
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By Emilio Parodi

MILAN - Italian investigators have seized documents from the Milan offices of International Business Machines Corp as part of an investigation into allegations of fraud at one of its customers, BT Italy, a unit of Britain's BT Group, sources said.

Dozens of tax police visited the Italian offices of nine suppliers to BT Italy, including the U.S. tech group, on Thursday, as well as BT Italy's own headquarters, and took boxes of documents away, said sources familiar with the probe.

IBM spokesman Alessandro Ferrari said the company was cooperating with authorities.

The U.S. group is not formally under investigation and none of its representatives has been accused of wrongdoing, but the warrant for Thursday's seizures, seen by Reuters, states that some transactions between BT Italy and its suppliers were faked.

The warrant authorized the search for evidence in relation to allegations that former BT Italy managers had conspired with suppliers and customers to fake orders and to issue false credit notes in order to reduce BT Italy's costs.

Investigators also sought evidence that BT Italy and suppliers contrived sale-and-leaseback transactions to artificially boost sales and profit margins. These transactions involved several firms, including IBM, according to the warrant and the sources.

The accounting scandal surfaced last October when BT Group said it had discovered accounting errors at its Italy unit. In January, it characterized it as improper accounting and took a write-down of around 530 million pounds ($690 million).

In March, it filed a criminal complaint with Italian prosecutors, accusing several former Italy executives and other employees of breaking company rules and unlawful conduct.   Continued...

FILE PHOTO: The logo of BT is seen outside the headquarters in Milan, Italy January 24, 2017.  REUTERS/Stefano Rellandini/File Photo