Prosecutor Seeks Indictment for Telecom Italia in SIM Fraud Case

A Milan prosecutor filed a request to indict Telecom Italia SpA and three former executives in connection with SIM-card fraud at the domestic mobile phone unit, according to a court document.

The prosecutor will seek to charge Telecom Italia because it failed to prevent the alleged crime and it benefited from it, according to the indictment request. The prosecutor is also seeking to indict former Chief Executive Officer Riccardo Ruggiero and ex-managers Luca Luciani and Massimo Castelli with obstruction of regulatory activity, the document showed. This crime carries a maximum jail sentence of eight years.

Milan Prosecutor Alfredo Robledo is trying to prove that the executives allegedly inflated Italian wireless client numbers to boost the company’s market share. The prosecutor alleges Telecom Italia’s executives unlawfully renewed more than 5 million pre-paid SIM cards close to their expiration date by recharging 1 euro cent each, according to the documents. The allegedly inflated market share was then communicated to Italy’s communications regulator, prompting the offense. The probe is reviewing the period between 2006 and 2008.

A judge will set a preliminary hearing to review the request.

Luciani and Castelli held positions at Telecom Italia in the period under investigation, including head of marketing and sales and director of operations at the domestic mobile business, respectively. The preliminary investigation was completed in April, prompting Luciani to step down as head of Telecom Italia’s Brazilian unit on May 5.

“The recent conclusion of complex and lengthy investigations regarding past management of Telecom Italia Mobile in Italy has generated growing noise, which did not benefit either Luca’s image as a manager or our company, so we decided to part with Luca,” Chairman Franco Bernabe said in a May 10 conference call.

Lawyers for the three men weren’t immediately available for comment. A Telecom Italia spokesman wasn’t immediately reachable for comment.

Telecom Italia fell as much as 4.5 percent to 69.85 euro cents and traded down 4.2 percent as of 5:13 p.m. in Milan, giving it a market value of 12.8 billion euros ($16 billion).

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