Law-enforcement officials in Italy arrested 20 people as part of a widening investigation into alleged leaks and abuses in the security office of Telecom Italia.
Among those arrested, according to people close to the investigation, were several former Telecom Italia employees, as well as members of Italy's paramilitary police force, the Carabinieri, and Italy's tax police force. No charges have been filed against those arrested.
The investigation was launched months ago to ascertain whether Telecom Italia's security office and a Florence-based private detective agency were acting as a sort of free-lance spy ring, improperly using phone records and bank-account data belonging to Telecom Italia customers and employees. Prosecutors suspect that some law-enforcement officials were part of the operation. They are still trying to determine why people at the Telecom Italia security office and at the detective agency allegedly gathered the information and how it may have been used.
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Tuesday's arrests pose yet another problem for Telecom Italia, which is already battling financial, political and legal problems as its seeks to reorganize itself and reverse the steady decline in its stock value. Last Friday, Marco Tronchetti Provera, who controls 18% of Telecom Italia shares, abruptly resigned as chairman of the company following a public dispute with Prime Minister Romano Prodi over a sweeping reorganization of the telecom giant.
Prodi objected to Tronchetti Provera's plan to separate Telecom Italia's fixed-line and wireless assets into two separate companies, a move that could pave the way to a sale of all or part of the assets later on, possibly to a foreign buyer.
Prodi responded with the unusual step of publicly disclosing private details of conversations he had with Tronchetti Provera about Telecom Italia's strategy, including negotiations about an equity swap with Rupert Murdoch's News Corp.
Prodi's disclosure sent a clear message that the government was opposed to any sale of Telecom Italia's mobile unit. After the prime minister's disclosure, Murdoch said he was suspending his negotiations with Telecom Italia. Earlier this week, prosecutors in Rome opened a separate investigation into possible securities-law violations at Telecom Italia, in part stemming from discrepancies between what Prodi disclosed about Telecom Italia's plans and what Tronchetti Provera told the market. No targets have so far been named in that probe.
The investigation into the alleged leaks and abuse of information doesn't directly involve the political dispute over Telecom Italia's reorganization. Still, it threatens to shine an unflattering light on the company's internal operations. Telecom Italia had no comment on the arrests Tuesday. The company in August released a statement in which it said the company and its management had done nothing improper.
According to people close to the investigation, among those arrested Tuesday was Giuliano Tavaroli, a former Carabinieri officer who worked in Telecom Italia's security department, where he was in charge of organizing wire-tappings for law-enforcement officials. Efforts to reach Tavaroli's lawyer were unsuccessful. Tavaroli, who has left Telecom Italia, had also been in charge of personal security for Tronchetti Provera.
Prosecutors are trying to determine whether Tavaroli worked with a Florence-based private-detective agency to sell private data about phone and financial records, the people close to the inquiry say. A member of the detective agency was also arrested Tuesday, along with the agency's accountant.
Prosecutors are also looking at bank accounts that they believe hold some EUR14 million ($17.8 million), including funds allegedly received by the detective agency's accountant in exchange for private data, according to the people close to the investigation.
One angle prosecutors are pursuing, according to these people, is whether the Telecom Italia security office was involved in an alleged spying operation during a political election last year. Prosecutors are looking into whether phone records of Alessandra Mussolini, granddaughter of dictator Benito Mussolini, and her associates were obtained by people working on the election campaign of her political opponent, Francesco Storace, during last year's race for the presidency of Italy's central Lazio region, these people say. Both Mussolini and Storace lost the race to another candidate. That investigation is continuing.
A similar scandal has rocked nearby Greece, where UK-based service provider Vodafone Group discovered its network had been infiltrated by phone-tapping software targeting an elite group of mobile phones, including those assigned to the prime minister, cabinet members, senior police and defense officials, among others. Equipment supplier Ericsson of Sweden also is under scrutiny by regulators probing the matter. Both companies deny any involvement with the bugging operation. Some experts say the operation appears to be the work of foreign intelligence agencies, given its sophistication.
-Cassell Bryan-Low contributed to this article.
(END) Dow Jones Newswires "
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