Top Berlusconi ally arrested over slush fund

Marcello Dell'Utri, one of the linchpins of Silvio Berlusconi's business empire, was arrested yesterday, charged with helping to build up millions of pounds in illegal slush funds through fraudulent manipulation of his advertising company's books.

Finance police raided the Milan headquarters of Publitalia, Mr Berlusconi's advertising agency, of which Mr Dell'Utri is president. They held him and two other company officials while they searched the premises. Mr Dell'Utri was taken into custody at a prison near Turin pending his first court hearing on Monday.

Prosecutors accuse Mr Dell'Utri and Publitalia officials of systematically inflating invoices on sports sponsorship contracts by as much as 70 per cent, and then sharing the illegal profits with their clients.

Mr Dell'Utri has already been formally placed under investigation in the affair by magistrates in Turin. He is one of 37 defendants in the case, which prosecutors believe involves at least 60bn lire in illegal slush money.

Mr Dell'Utri has denied personal responsibility for any wrongdoing, saying that "in a company with a turnover of 4 trillion lire a year there are bound to be a few irregularities".

His arrest can only damage the reputation of his boss and close friend, Mr Berlusconi, who faces the possibility of standing trial on charges of bribing and defrauding the tax authorities.

Mr Berlusconi's political standing has waned steadily since his resignation as prime minister last December. His right-wing Freedom Alliance was unexpectedly defeated in local elections last month.

He could be forced to sell all or part of his media empire, including Publitalia, if a series of referendums on media ownership go against him next month.

To add to his bad luck, his seemingly invincible first division football team, AC Milan, has lost both the Italian championship and the European Cup.

Mr Dell'Utri, 53, has been a close collaborator of Mr Berlusconi's since the early 1980s, when they built a new residential area in Milan together called Milano 2. He took over the presidency of Publitalia shortly after and made it Italy's top advertising agency, controlling about 90 per cent of advertising on television.

nMilan (AFP) - Mr Berlusconi is to face a preliminary hearing on 4 July to decide whether he should be prosecuted over alleged illegal payments made by his Fininvest group to finance police, court sources said yesterday.

The Milanese prosecutor called last week for Mr Berlusconi to appear before a court to answer allegations that illegal payments totalling 355 million lire (pounds 138,000) were made to finance police when they inspected four companies in the Fininvest group from 1989 to 1992. The examining magistrate responsible for preliminary enquiries, Fabio Paparella, has the authority to accept or reject the demand.

Twenty other people would also be questioned and might face trial, including Mr Berlusconi's brother, Paolo.

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