March 16, 2015 / 1:58 PM / 2 years ago

Italy hit by new public contracts corruption scandal

FLORENCE/ROME, Italy (Reuters) - Italian police arrested four people and placed 51 under investigation on Monday in a probe into corrupt management of contracts for public works including part of a multi-billion euro high-speed train line.

Police in Florence detained two suspects and put the other two under house arrest in the latest probe into the kind of widespread graft that Italy has long struggled to root out of business and politics.

The contracts in question are worth a total 25 billion euros($26 billion), senior special operations policeman Mario Parente told a news conference.

One of those arrested was named as Ercole Incalza, who until late last year held a senior position in the public works department of the Transport and Infrastructure Ministry and had served under several governments.

According to the arrest warrant, the probe found that one of those arrested had helped arrange a work contract for Transport Minister Maurizio Lupi's son. Lupi rejected the accusation.

The investigation began with suspicions over contracts to build part of the high-speed TAV rail line near Florence. It eventually unearthed a much broader web of wrongdoing including rigged contracts for the Milan Expo world fair, which was at the center of a corruption scandal last year.

"We believe there is strong evidence of guilt," said Florence chief prosecutor Giuseppe Creazzo.

Endemic corruption continues to blight Italian business and politics despite Prime Minister Matteo Renzi's pledges to tackle the problem. Italy ranked 69th in Transparency International's 2014 Corruption Perceptions Index, joint last in the European Union with Bulgaria, Greece and Romania.

Six years of on-off recession have created fertile ground for the kickbacks and black economy that in turn prolong the crisis, the head of Italy's top audit court said last month.

Monday's arrests prompted more calls to clean up the whole system of public infrastructure procurement. The anti-establishment 5-Star Movement called both for Lupi's resignation and for a long-delayed anti-corruption law to be passed in parliament.

The head of TELT, which is due to build part of a TAV line between France and Italy, said the trans-Alpine project was protected from corruption partly because it was overseen by France and Europe as well as Italian authorities.

"We need to be strict. Those who supervise us need to be even stricter than we are, but we operate within a framework that objectively offers guarantees," TELT director general Mario Virano told reporters in Rome.

Reporting by Silvia Ognibene; Writing by Isla Binnie; Editing by Gavin Jones and Tom Heneghan

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