Rome

Berlusconi tax-fraud conviction explained

Ex-premier, media tycoon, 'the creator behind the system'

Berlusconi tax-fraud conviction explained

(By Emily Backus) Rome, August 29 - Italian supreme Cassation Court judges called media tycoon and ex-premier Silvio Berlusconi the "creator" of a system for manipulating media rights in their justification, released Thursday, for upholding the ex-premier's conviction for tax fraud on August 1. The definitive conviction, his first ever in nearly 20 years of legal entanglements, has deeply divided Italy's unprecedented left-right government this month, threatening to scupper the cabinet after just four months in office if the media magnate is stripped of his Senate seat. Berlusconi was the "creator of the mechanism for twisting (film) rights" for the television broadcaster Mediaset "that over a distance of years continued to produce (illegal) effects, reducing taxes for the companies that he headed in many ways," the judges wrote. Berlusconi knowingly allowed a system "without commercial justification" to continue under people he hand-picked, the judges continued. The judges found that Berlusconi was still responsible even after he vacated active managerial duties at Mediaset because, "perfectly knowing the mechanism, he let it continue unaltered, keeping subjects chosen by himself in strategic positions, who continued to deal with management in such a way as to allow the persistent rise of Mediaset's costs for the purpose of tax evasion". Berlusconi is guilty of devising a system in which offshore companies purchased rights to Hollywood films for Mediaset, which is part of a multi-billion-euro media empire controlled by the centre-right leader's family. According to the ruling, Mediaset then repurchased the rights from the offshore companies at inflated rates, leading to higher costs for Mediaset, pooling money in offshore funds, and smaller margins in Italy on which to pay taxes. The judges called Mediaset's treatment of television rights "a systematic game of mirrors" that "reflected a series of steps without commercial justification" and that "at every step the rise in cost was (to say the least) imposing". Key figures in the Mediaset affair were "largely maintained in crucial positions even after Berlusconi's resignation from corporate responsibilities, and were in continuous direct contact with him," the panel found. "Thus the lack of managerial power in the hands of Berlusconi...is not given as a barrier to recognizing his responsibility," the judges concluded. Earlier this month, the Cassation upheld a four-year prison sentence, which was reduced to one year of house arrest or community service due to an amnesty. But the high court tossed a five-year ban on Berlusconi's holding public office to lower court. While Berlusconi seems resigned to accept the one-year term, his People of Freedom Party (PdL) says it cannot tolerate working in the same government with the Democratic Party (PD) if it votes next month in the Senate to strip him of his seat in the Upper House. The Senate is set to vote September 9 on removing Berlusconi from office according to a new anti-corruption law that kicked in after his August 1 conviction. The Senate vote presents the second and more ominous threat to government stability after Italian government ministers finalized a deal to overhaul a property tax known as IMU on Wednesday. Eliminating the tax was a major PdL campaign promise, and PdL leaders threatened to pull support for the government if it failed to reach a deal with the PD. Premier Enrico Letta on Thursday claimed the future looked bright now that the tax controversy was behind him - despite ex-premier Silvio Berlusconi's ongoing legal and political woes. "I am not afraid that there will be an influence on the life of the government...due to the convictions or legal proceedings (of Berlusconi)," Letta told Italian radio.

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