Italian scandal set to claim more scalps at WPP

WPP is expected to fire several senior staff in the next few days as an investigation into alleged corruption at its Italian arm deepens.

Sir Martin Sorrell's acrimonious battle with the former head of the Milan division, Marco Benatti, turned nastier still yesterday when the advertising group demanded an explanation of what insiders dubbed "irregular personal expenses".

WPP fired Mr Benatti last month amid allegations of fraud. Since then an uncomfortable stand-off has ensued, with Sir Martin claiming to have strong evidence of corruption and Mr Benatti insisting he is the victim of a personal vendetta.

Directors of Fullsix, a WPP subsidiary that Mr Benatti is trying to buy out, plan to ask for a full explanation of payments made to businessmen with close links to the Italian. A board meeting scheduled for yesterday was postponed at the last minute to Wednesday for reasons not made clear.

WPP is also concerned about a plush Milan flat it recently discovered it has been paying for, even though it is not available for use by the company. The rent on the flat is €75,000 (£50,000) a year. Until now, Mr Benatti has stonewalled such inquiries, which he regards as unfair. But as the temperature rises he may be forced to discuss the contentious payments.

As WPP's investigation widens, it seems inevitable that further sackings will follow. WPP declined to discuss such moves, but it is thought several senior Italian staff are at risk.

Investigators from Kroll, the corporate troubleshooter, are trying to gather as much information from the staff as possible before they are shown the door. Daniela Weber, the chief operating officer off WPP's Italian business, is not a target of the inquiry, it is understood.

Sir Martin guards his personal life fiercely and has declined to discuss his relationship with Ms Weber beyond saying it is "irrelevant". Sir Martin divorced last year, denting his personal fortune by £29m.

The only item on the agenda of the Fullsix board meeting was supposed to be the appointment of bankers to lead the takeover deal. Mr Benatti owns 41 per cent and WPP 26 per cent of Fullsix, which is listed in Italy.

Fullsix directors, including Ms Weber, tried to add the so-called "irregular personal expenses" to the agenda but are thought to have been rebuffed. Mr Benatti made no comment, beyond repeating his claim that Sir Martin, through "brutal and unjustified behaviour", has wrecked WPP's position in Italy.

Mr Benatti was hired as a consultant to WPP in 2002. He ran the Italian operation, earning commission for business brought to the group.

WPP alleges he inflated performance figures to raise his fees, which Mr Benatti denies. The advertising giant also contends Mr Benatti hid his stake in Mediaclub, a firm he recommended WPP should buy. Mr Benatti denied he did any such thing yesterday and claimed his stake is inconsequential in any case.

WPP filed a suit against Mr Benatti on 11 January. The court document claims damages for "breach of fiduciary duties".

Further details emerged of two alleged break-ins at the Milan offices of WPP. Sources close to the inquiry confirm the offices appear to have been broken into on consecutive weekends in January. WPP's Italian arm brings in $250m (£140m) a year, barely more than 2 per cent of group revenues. Consequently, investors have given it little attention. But analysts concededthere is a "reputational" risk to the company if the scandal drags on.