Pizzolato may act in the Telecom Italia case.

By Alessandro Cristo and Marcos de Vasconcellos
Legal Consultant - The arrest of Henrique Pizzolato paves the way for Italy to move forward with investigations that have long troubled Italians and Brazilians: the enormous "unaccounted for" sums of money from Telecom Italia that ended up in Brazil. The Italian company, which was once state-owned, conducted the overpriced purchase of CRT (Companhia Riograndense de Telefonia), sold for US$250 million more than its appraised value, which, according to the allegations, was agreed upon between Telecom and the Spanish company Telefónica, then the controlling shareholder of CRT.

CRT was sold in 2000 to the Brasil Telecom group, which included Telecom Italia itself, the Opportunity fund—owned by Daniel Dantas—CitiGroup, and pension funds from Brazilian state-owned companies, led by Previ, the pension fund for Banco do Brasil employees. The Previ board was chaired by Pizzolato (pictured), who, in testimonies collected at the time, said he suffered strong pressure from Telecom Italia and the Brazilian government to close the deal as quickly as possible, even with the inflated price. Dantas hired Kroll to find out who kept the money, now claimed by Telecom Italia shareholders—which led to the infamous operations dubbed "chacal," against the investigators, and "satiagraha."

At the time, Italian lawmakers denounced the scheme as being very similar to that used by Telecom Italia in Serbia. The country's parliament had even established a Parliamentary Inquiry Commission into Telekom Serbia, which revealed shady dealings between negotiators from both countries.

Pizzolato's importance in resolving the Italian corruption case partly explains why the Italian government, since the Brazilian press reported Pizzolato's departure for Italy, ordered its ministries to remain silent on the situation. The idea, according to Italian authorities in a report published by the Folha de S.Paulo newspaper in November, is to avoid a diplomatic crisis between Italy and Brazil. It would be a mistake to think that this crisis would be motivated solely by the question of whether or not to extradite the former director of the Bank of Brazil due to his conviction in the Mensalão scandal.

Italy's current Foreign Minister, Emma Bonino (pictured), from Italy's Radical Party, even participated in the Parliamentary Commission of Inquiry into Telekom Serbia, gaining firsthand knowledge of the scheme used by the company to fuel corruption in other countries. She has the power to request that Pizzolato testify, to recount the details of the operation in Brazil. However, the pressure to suppress the case could reopen old wounds that have not yet healed.

The Secretary-General of the Italian Ministry of Foreign Affairs, Michele Valensise, is facing harsh criticism from the Italian community in Brazil for having requested, in 2006 when he was ambassador to Brazil, that the Brazilian judiciary dismiss a case. The request, made in a note sent to the Brazilian Ministry of Foreign Affairs, was seen as an attempt to silence a corruption case involving Italy and Brazil. Unsigned, the verbal note, transcribed by the embassy and authenticated, requests the dismissal of the case involving the former Italian deputy consul in São Paulo, Luigi Estero. The main focus of the action was the disappearance of a criminal complaint filed against Consul Gianluca Bertinetto, who was removed from his post and career by the Italian Parliament shortly after the episode, denounced by then-deputy Piero Marini Garavini.

In the statement, the Embassy affirms that Luiz Estero had been removed from his position and, therefore, the action in the Brazilian Federal Court was no longer applicable. The lawsuit concerned the election for the Committee for Italians Abroad. The committee, headed by Estero, was accused of hindering the candidacy of Francesco Scavolini and Carmelo Distante in Brazil, after they assisted in the investigation of allegations of corruption involving the transfer of public funds from Europe to Brazil.

Million-dollar transfer

Carmelo, who served on the committee from 1994 to 2003, contributed, in his final year in office, a complaint involving multimillion-dollar frauds related to European Union funds transferred to Brazil. The document he signed indicates the creation of shell companies in Brazil that allegedly received millions of euros in non-repayable European Union funding. The frauds are said to have involved millions of euros, according to allegations that are part of ongoing legal proceedings in Brazil.

With the opening of companies using "front men," Italian public officials approved millions in funding—illegal, since the maximum limit for such funds at the time was 250 euros—but the companies never got off the ground.

People involved in the process, interviewed by ConJur, believe that the issue is closely linked to the transfer of money by Telecom Italia to Brazil. The modus operandi is similar to that of companies linked to the Italian company in Brazil, which would emerge, receive millions in investments, and then go bankrupt. It's a puzzle involving corruption in two countries, in which Henrique Pizzolato, now imprisoned in Italy, is a key piece.