Couldn't they have voted for MorganChase or Citigroup instead?

Italians Complain Country
is Run by Goldman Sachs

By Ambrose Evans-Pritchard
The Telegraph, London
Wednesday, May 30, 2007

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/05/29/cnital...

Italians grumble that Goldman Sachs runs their country, much as the Jesuits ran countries during the Counter-Reformation.

Premier Romano Prodi is an ex-Goldman Sachs man, as is central bank president Mario Draghi and the deputy treasury chief Massimo Tononi.

The price paid for having so many friends at court is that the elite bank inevitably becomes entangled in the financial scandals that so often swirl around the Italian political class.

For the past month, Goldman Sachs has been dragged into a widening corruption probe into the Siemens-Italtel merger dating back to the mid-1990s.

The inquiry has moved uncomfortably close to Mr Prodi, who was on the Goldman Sachs payroll from 1990 to 1993 and again in 1997 after his first stint as prime minister.

Politicians from the Forza Italia party have jumped on suggestions that Goldman Sachs may be involved, making damning allegations in the Chamber of Deputies under parliamentary immunity.

The inquiry is just one of several probes across Europe into a 400 million euro (£273 million) network of black accounts used by Siemens to grease deals.

Prosecutors in Bolzano, Northern Italy, claim to have unearthed a Siemens payment of 10 million deutschmarks (£3.2 million) to a Goldman Sachs account in Frankfurt in July 1997. From there it ricocheted around the world, going to London and Tokyo before returning to Germany in yen -- according to Italy's financial newspaper Il Sole.

A Goldman Sachs employee summoned for questioning earlier this month said the 10 million deutschmark payment had been made for an unknown third party.

Italian Treasury Police raided the Milan office of Goldman Sachs in February, where they removed a file called "MTononi/memo-Prodi 02.doc," among other papers.

They have also obtained a letter to Siemens from the Frankfurt office of Goldman Sachs in 1993 pitching for business on the Italtel deal.

At the time, Italtel was being privatised by the Italian state holding company IRI, which Mr Prodi had run in the 1980s and would soon run again before becoming prime minister in 1994.

The letter said Goldman Sachs's "knowledge of IRI and its management could be extremely important in a negotiation. Since March 1990 our senior adviser in Italy has been Professor Romano Prodi."

It is reported that Goldman Sachs later secured the work as an adviser on the Siemens-Italtel merger. The bank refused to comment, deeming the matter confidential.

"We refute any suggestion that our actions are improper and we are co-operating fully with the authorities in the investigation," said the bank.

Bolzano prosecutors said Mr Prodi is not a target of their probe although they are examining his fees from Goldman Sachs. Mr Prodi received £1.4 million between 1990 and 1993 through a Bologna consulting company named Analisi e Studi Economici, jointly owned with his wife. The company secretary later told The Daily Telegraph that much of the money came from Goldman Sachs.

Mr Prodi has been dogged by allegations that he sold off state properties cheaply to friends and political allies.

The most controversial was the sale of the Cirio-Bertolli-De Rica food group in October 1993 to Fi.Svi, a shell-company, that sold it on immediately for 310 billion lira (£100 million) to Unilever, where Mr Prodi had been a paid consultant until weeks earlier. Credito Italiano had valued the stake at 600-900 billion lira.

Goldman Sachs was deeply involved in this transaction. A memo from the bank's London office sent to Unilever in Milan, dated August 24, 1993, and marked "strictly confidential," discusses the deal in depth and suggests that Mr Prodi might have been involved -- a claim that he has always denied. "Fi.Svi is going to call Prodi in order to have full support in this discussion with Unilever," it said.

A Rome prosecutor, Giuseppa Geremia, concluded in November 1996 that there was enough evidence to press charges against Mr Prodi for conflict of interest, but by then he was prime minister. She set off a firestorm.

Ms Geremia later told The Daily Telegraph that intruders broke into her offices. The case was shut down within weeks by superiors. She was exiled to Sardinia.

Allegations of wrongdoing by public figures come with a big health warning in Italy, where political scores are often settled through criminal probes. "Goldman Sachs is being dragged into this by the right-wing politicians to get at Prodi. It is trial by newspapers," said one observer.

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