TheChek News Flow

Italy arrests dozens over €520mn ‘mafia tax fraud’

Luxury cars and boats among items seized over widespread VAT fraud scheme, says European prosecutor

Italian authorities and their European counterparts have arrested 43 people and seized assets worth €520mn including luxury cars and boats in a crackdown on an alleged tax fraud scheme run by Italian mafia groups.

The European Public Prosecutor’s Office, which led the investigation, said members of several Italian criminal groups came together to run a complex and “highly profitable tax evasion scheme”. The scheme, dubbed a “VAT carousel fraud”, involved invoices for €1.3bn worth of laptops, earpods and other electronic goods.

The alleged fraud involved the creation of fake companies — or “missing traders” or “ghost companies” — in Italy, other EU countries and other countries outside the EU, which would buy and sell goods between them, then vanish without fulfilling their tax obligations.

The network provided a paper trail for claims for fraudulent VAT reimbursement from Italian authorities. 

The assets frozen on Thursday, to compensate the EU and Italian authorities for money lost through the unwarranted VAT reimbursements, includes 129 bank accounts, nearly 200 apartments, homes and other real estate holdings, and 44 luxury cars and boats, the EPPO said.

Participants in the scheme included members of the Naples-based Camorra and Sicily’s Cosa Nostra, which invested as a means of laundering money from other criminal activities, Italian authorities said.

“Mafia methods” were used to “settle conflicts that arose within the criminal syndicate between the members of the different criminal organisations”, the EPPO said in a statement. 

Of those arrested on Thursday, 34 have been sent to prison to await trial, while nine are under house arrest, authorities said. In addition to the 43 people held in Italy, seven European arrest warrants were issued for suspects in Bulgaria, Czech Republic, the Netherlands, Spain and non-EU countries.

In total, police across 10 EU countries carried out searches at about 160 locations on Thursday as they hunted for more evidence of the scheme, which is believed to have involved at least 195 people and about 400 companies.

Laura Kövesi, the European chief prosecutor, said the case was a “defining investigation” for the EPPO, which has grown increasingly anxious about the penetration of Italy’s sophisticated organised crime groups into financial fraud across Europe. 

“It has been a while since we started to ring the alarm bell about dangerous organised crime groups’ heavy involvement in fraud [against] the EU budget,” she said, citing the “colossal damages” and “the threat to our internal security” caused by such activities.

“We now shed light on a first such big case,” Kövesi said.   

Italian Prime Minister Giorgia Meloni hailed the arrests and the asset seizures, which she said demonstrated “the government’s firm commitment to combating tax evasion, one of our top priorities”.

The crackdown on Thursday comes seven months after Italian authorities seized assets worth €600mn — including villas, luxury cars, watches and jewellery — and arrested 22 people in connection with alleged fraud involving the EU’s €800bn post-pandemic recovery fund.

Of those accused in that case, two have already admitted to wrongdoing through a plea deal, while the trials for the rest began this week.

Burberry’s new strategy is one check on a long list

Returning to its roots may take luxury retailer back to the root of its problem

Protecting people from the weather is great business. That, at least, is what Burberry’s new chief executive Joshua Schulman believes. A promise to reverse the group’s doomed “brand elevation” strategy and return it to its trench-coat-and-scarves roots sent the stock up nearly a fifth on Thursday. A sane strategy is not a bad place to start. But it will by no means solve all of Burberry’s problems.

Schulman’s approach makes intuitive sense. That Burberry’s zany, modern and expensive products were gathering dust on shelves is clear — and was highlighted by a 20 per cent decline in first-half sales. That it might do better by selling tradition and returning prices to earth also seems reasonable: “rainwear” outperformed even during the slump, and recent campaigns that focused on traditional Britishness have been well received. Bernstein’s brand heat observatory, which tracks the attractiveness of brands on social media, shows Burberry as the biggest gainer in the third quarter of the year.

Simply backing out of this failed experiment could well staunch Burberry’s losses. The initial phase of this turnaround will not be pretty, however. Already, cost cuts and inventory provisions have lopped 6.4 percentage points off the group’s gross margin year on year. There may be more pain as Burberry discounts to clear an overhang of unsold products and restore the perception of scarcity that full-price luxury sales depend on. 

The bigger concern is that the cut of Burberry’s post-turnaround coat remains fuzzy. What, for instance, is the best distribution network for a luxury coat and scarf provider? Its stores would probably struggle to generate the same sales per square foot as those of hyper-luxury handbag retailers such as Hermès and LVMH. In a world where luxury providers fight over prime locations, that may require rethinking its store footprint. 

The potential size — and growth potential — of Schulman’s Burberry is also unclear. While the likes of Italy’s Moncler have redefined what it is possible to achieve with a puffer jacket heritage, British coats remain something of a niche market. Indeed, Burberry’s many reinventions stem precisely from the realisation that growth in its core segment is not limitless.

It may be possible to stretch luxury outerwear’s confines: Burberry hopes to move into expensive leather, cashmere and technical gear. Indeed, Schulman sees no reason why, over time, the group should not return to its peak £3bn turnover, or around a quarter above the sales expected this year. Schulman’s strategy has a good chance of succeeding. But returning to its roots may take Burberry back to the root of its problem. 

MediaForEurope’s stake in German broadcaster is a fraction below the 30% threshold for making a mandatory takeover offer

The television empire founded by Silvio Berlusconi has stepped up its campaign against German broadcaster ProSieben, calling for the company to “act faster” and make “radical choices” amid speculation that it is gearing up for a hostile takeover.

MediaForEurope (MFE), which is majority owned by the family of the late Italian prime minister and is ProSieben’s largest shareholder, responded to the company’s quarterly results on Thursday with a public call for more growth, less debt and a faster disposal of assets outside its core entertainment business.

“The current economic situation of the advertising market in Germany increases the sense of urgency,” said Marco Giordani, MFE’s chief financial officer. “We therefore ask the supervisory board and the executive board to act faster, accelerating change and efficiency measures also through radical choices, without further delays.”

With a 29.9 per cent stake in the company, MFE is a fraction below the 30 per cent threshold for making a mandatory takeover offer under German law. Asked if it was planning a takeover bid, the company declined to comment.

ProSieben did not immediately respond to a request for comment.