Italian Court Awards Damages in Corruption Case

Two decades ago, Berlusconi's Fininvest bribed a judge for a favorable decision. Now the losing party in that litigation stands to collect more than $600 million.

, Focus Europe

   |0 Comments

Corruption costs the Italian economy some €60 billion ($80.4 billion) a year, estimates Italy's Corte dei Conti, a public body that monitors state finances. Yet quantifying the cost of corruption in an individual case can be a complicated task. That was the question at the heart of a recently decided landmark case pitting former prime minister Silvio Berlusconi's Fininvest SpA media holding company against rival Compagnie Industriali Riunite SpA (CIR), a diversified holding company owned by businessman Carlo De Benedetti. In September, Italy's Corte di Cassazione, the country's highest appeals court, agreed with two lower courts that it was indeed possible to put a price on the damages CIR had suffered when a judge was bribed in earlier litigation between Fininvest and CIR.

"The case was important because it was one of the first times corruption-related damages were assigned in Italy, and the amount of the damages awarded was significant," says Paola Mariani, an international law professor with Milan's Bocconi's University. The appeals court set final damages owned by Fininvest to CIR at €494 million ($662 million), a reduction from the €750 million ($1 billion) originally stipulated in 2009 by the first court ruling in the case.

The case's origins date back more than 20 years to a takeover battle between Fininvest and CIR for media group Mondadori. In 1988, CIR thought it had secured a deal to take control of Mondadori but the sellers instead struck up a new agreement with Fininvest. CIR started arbitration proceedings in 1990 to contest the sale. While the company won an initial ruling, an appeals court overturned that decision the following year, paving the way for Fininvest to take over Mondadori.

But in a criminal case brought by public prosecutors in 1998 involving Berlusconi and other Fininvest representatives, it emerged that Fininvest lawyer Cesare Previti had bribed Vittorio Metta, the lead judge on the 1991 appeals case, before the court had issued its ruling. Metta, Previti and two other Fininvest lawyers were found guilty of corruption in 2007. Berlusconi had himself already escaped corruption charges four years prior because the statute of limitations had expired. However, the Corte di Cassazione agreed in its September 2013 ruling that he could be deemed liable for corruption in civil proceedings and that Fininvest, in turn, was liable for his actions.

Lawyers for CIR, led by Elisabetta Rubini of Studio Legale Rubini and Vincenzo Roppa of Roppo & Canepa, began a quest to seek damages through a civil suit that got underway in 2004. (Solo practitioner Nicolò Lipari joined the legal team in proceedings before the Corte di Cassazione.)

The damages calculation focused on the terms of a deal between Fininvest and CIR to split Mondadori's assets—Fininvest receiving the publisher Arnoldo Mondadori Editore SpA, and CIR receiving the l'Espresso SpA publishing house and its national newspaper, La Repubblica—and how that deal changed after the appeals court ruling. The two companies had first settled on a deal that would have seen Fininvest paying CIR the equivalent of €206.6 million. Those terms changed radically following the appellate ruling, with CIR instead having to pay Fininvest the equivalent of €188.5 million. The nearly €400 million difference in the financial terms between the first and the final versions of the deal formed the basis for the final damage award.

"We argued that CIR was placed in an unfavorable contractual position as a result of a corrupted [judgment]," explains Rubini.

Fininvest has denied any wrongdoing. For its defense, it engaged Giuseppe Lombardi of Italian corporate law firm Lombardi Molinari, along with solo practitioners Romano Vaccarella, Achille Saletti, Fabio Lepri and Giorgio De Nova. They contended that it wasn't clear that the Rome appeals court would have ruled differently in 1991 without the bribe, and argued that, under Italy's civil code, CIR should have challenged that initial ruling before seeking damages.

The Corte di Cassazione agreed with CIR, however, that the strategy would have been impracticable. It is fair to assume, the high court found, that without the bribe the appeals court would have ruled in favor of CIR in 1991.

Now that the final word is out on the case, lawyers are trying to understand what it could mean for other corruption cases in Italy. Despite difficulties in obtaining evidence and quantifying damages, Mariani believes the decision could spur other companies that have suffered financially as a result of corruption to seek redress in civil courts.

What's being said

Comments are not moderated. To report offensive comments, click here.

Preparing comment abuse report for Article# 1202633676601

Thank you!

This article's comments will be reviewed.