The extraordinary claim by Renzo Francesconi, who quit as chief operating officer on Wednesday night after just six weeks in the job, forced Italian stock market regulators to suspend Olivetti shares amid chaotic scenes on the Milan bourse.
Shares in the two holding companies of Carlo De Benedetti, Olivetti's biggest shareholder and until Tuesday night its chairman, also went into freefall as fears gripped the market that the Italian entrepreneur's entire business empire was about to crumble.
Olivetti's plight could prove most serious for a group of about 10 big London-based investment managers who emerged collectively as the company's biggest shareholders following a pounds 913m rescue rights issue last December. Between 30 per cent and 40 per cent of Olivetti shares are now estimated to be held in London. ING Barings Asset Management is sitting on a near 6 per cent stake alone, making it Olivetti's biggest shareholder after Mr De Benedetti.
The drama began on Tuesday when Mr De Benedetti resigned after the company announced a 440bn lire loss for the first six months. His replacement is Antonio Tesone. But it escalated in spectacular fashion yesterday when Mr Francesconi quit, alleging that the losses were far worse than stated.
In a letter published in Italian newspapers he said he was resigning because he "did not agree with the presentation of the half-year results approved by the board". He added that "the situation is very serious and for Olivetti there is the prospect of a very difficult future".
Mr Francesconi told journalists after he resigned that he couldn't accept the half-yearly figures because "numbers and cash flow are not negotiable".
Olivetti's chief executive, Francesco Caio, immediately issued a statement denouncing Mr Francesconi's claims as "totally unfounded" and warned it might take legal action.
But the Consob, the Italian stock market watchdog, suspended Olivetti's shares and hauled in Mr Francesconi and the directors as it launched an inquiry into the claims.
Mr Caio said Mr Francesconi's statement "was clearly the result of stress of the thought of the great task which lies before us".
But Mr Francesconi was in cheerful mood as he left the Rome offices of Consob after a 90-minute grilling yesterday afternoon.
"Do I look stressed to you?" he asked waiting journalists, before disappearing into the Rome traffic on his scooter.
Meanwhile, it emerged last night that Olivetti's influential London-based shareholders were instrumental in Mr De Benedetti's departure. The group held a meeting in London last week, chaired by Nomura Asset Management, at which it discussed Olivetti's deteriorating situation since the rights issue.
A spokesman for ING Barings Asset Management said that while it had not expressly asked for Mr De Benedetti's resignation, he and Olivetti's other directors were made aware of their unhappiness.
"Our position is fairly clear. Since the rights issue the company has not been in reasonable contact with its shareholders."
Other fund managers understood to have taken up shares in the offer include PDFM, Mercury Asset Management, Invesco and HSBC Asset Management. The lead manager on the rights issue was US investment bank Lehman Brothers.
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