New wave of state corruption stuns the Italians

Four years after the tangentopoli corruption scandals that felled a generation of politicians and industrial managers, Italy is coming to grips with a shocking discovery: graft, bribery, illicit book-keeping and clandestine power-broking are alive and well and lurking just beneath the surface of the supposedly squeaky-clean state apparatus.

For the past week the country has been agog as magistrates have made high-level arrests and unravelled a web of corruption in which a handful of public-sector managers illegally raked millions of pounds off state assets through a complicated system of bribery and insider trading.

First to be slapped into custody was Lorenzo Necci, head of the state railway company and long deemed so far above suspicion that his name was bandied about earlier this year as a possible super-minister in charge of transport and public works contracts.

The evidence gathered by the magistrates suggests Mr Necci was at the centre of a multi-million pound racket to make money from state contracts, especially arms sales to the Third World, as well as illegal share transactions involving up to 150 companies created with capital from the state railway. He has already admitted taking a kickback of around pounds 8,000 each month.

His fellow detainees include Pierfrancesco Pacini Battaglia, a shady financier whose Geneva bank, the Banque des Patrimoines Prives, is accused of bankrolling the whole operation; Emo Danesi, a well-connected former Christian Democrat politician and one-time member of the illegal P2 masonic lodge; Pierfrancesco Guargaglini, chief executive of the arms manufacturer Oto Melara; and two senior state prosecutors, Orazio Sava of Cassino and Roberto Napolitano of Grosseto, accused of accepting money to keep the judiciary off the trail.

The press has dubbed it tangentopoli 2, and reporters have been sniffing in eager anticipation of further scandal. In some ways this affair is similar to the one that brought down the old guard: the same technique for distributing money among key players, the same percentage, 15 per cent, demanded as a kickback for state contracts, and so on. Once again, the magistrature came across the trail of corruption almost by accident, by way of a routine investigation into stolen cars discovered on board a container ship in the Tuscan port of La Spezia.

The protagonists that have emerged so far got to know each other in the venal 1980s, through the same structures that were exposed for rampant corruption last time around, notably the state energy company Eni and its various subsidiaries. Mr Pacini Battaglia was a key figure in the first tangentopoli, questioned in 1992 and exempted from prosecution only because he spilled the beans on more prominent personalities.

The fact that he is now implicated in very similar activities reflects what a poor job Italy did of purging itself of corruption; after thousands of arrests, millions of hours of interrogation and endless court proceedings, just one person has been convicted and sent to jail, the former Milan city councillor Walter Armanini. Even he is now out on day-release.

This latest scandal differs from tangentopoli in one important respect. Last time it was the politicians, especially the Christian Democrat and Socialist parties, who were at the top of the pile of illegal payments; the new racketeers are more anonymous figures who have taken advantage of the political vacuum left by the collapse of the old guard.

That does not mean politicians might not emerge as co-conspirators. Evidence from key witnesses in the past few days have thrown up the names of Cesare Previti, who served as defence minister during Silvio Berlusconi's 1994 government, and the Foreign Minister, Lamberto Dini. Neither has been placed under investigation but the magistrates are broadening their inquiries.

One effect of the new scandal is that all debate on ending the tangentopoli investigations has come to a halt. Instead, Italy will have to reflect on the mistakes it made last time, not so much in investigating corruption as in ensuring its eradication. "We have always thought of corruption as a momentary deviation from the norm of Italian public life," said Pino Arlacchi, a left-wing senator and an expert on organised crime. "We should learn instead to see the phenomenon as a disease whose effects need to be minimised over a long period. The United States and Hong Kong have managed it, but it took 20 years."