Italy and the Eco-Mafia

How billions are made through dumping toxic waste--with little public outcry

First, the pond went black. Then, the fish started to die. Finally, the authorities condemned the land. Stefano Galli sweeps a trembling hand over his poisoned acres and tells the tale of a deal too good to be true. After buying seed at a local agricultural-supply store on a spring day in 1999, the stout, 67-year old farmer from Umbria (Galli is a pseudonym) was approached in the parking lot by a sales agent who persuaded him to test a new fertilizer on his land. The deal: 550 kilograms for free, with a handshake to purchase more in the future if he was satisfied. Unbeknownst to Galli, the black mulch he then spread across his wheat, corn, and vegetable fields was highly toxic industrial waste. After the first heavy rains, fish started floating belly-up on the surface of a pond that catches runoff. "I feel my land is dying before my eyes," says Galli, who fears that the farm held by his family for generations is now worthless.

The damage spreads far beyond Galli's rolling fields. Italian magistrates confirm, based on wiretaps, that criminal groups won bids to haul off toxic waste from factories in the north but never treated the waste, as promised. Instead, they dumped their poisonous cargo on some 10,000 hectares of farmland in Umbria, one of Italy's most beautiful and productive regions. The Environment Ministry estimates the cleanup cost at $1.5 billion.

A three-year police investigation, dubbed Operation Greenland, has yielded a formal request for indictments against 28 of Umbria's alleged despoilers. Suspect No. 1 is Alberto Paggi, the owner of Ecoverde, a waste-disposal company near the town of Trevi. He is charged by the public prosecutor with waste trafficking, a felony punishable by up to eight years in prison. Prosecutors say Paggi hawked toxic sludge in the guise of fertilizer and dumped industrial waste illegally in national parklands in the south. In contrast, Paggi's lawyer, Donatella Tesei, says the state to date has not produced any proof of wrongdoing by her client.

The Greenland/Ecoverde case, now in pre-trial proceedings, marks a new, aggressive stage in Italy's struggle against one of the biggest environmental crimes of the 21st century so far. Italian officials have known for more than a decade that mob-linked businesses were charging manufacturers cut-rate prices to haul away mercury, lead, battery acid, and other byproducts of industry. They would then dump the refuse--untreated--in the countryside. But weak environmental laws and powerful industrial lobbies have thwarted change. Now, the business totals an estimated $7 billion in annual sales and involves 22 different criminal groups, according to a parliamentary commission and law-enforcement officials. With minimal operating costs--a rented truck, a shell company, and a driver--traffickers gross from $2,000 to $10,000 a truckload, depending on the toxicity of the refuse. "Mafia clans consider waste [trafficking] a real business. It's one that approaches the size of some government budgets," says Senator Paolo Russo, president of the parliamentary commission on waste trafficking.

In the past year, Italy has struck its first serious blows against traffickers. Legislation passed in 2001 finally makes trafficking in waste a felony (it was a simple misdemeanor before) and permits wiretapping of suspected criminals. Armed with the new law, prosecutors arrested more than 29 individuals last year and charged them with waste-related crimes. Investigations currently under way could produce dozens more arrests. "Until now, this group of criminals didn't believe there would ever be repercussions for their acts. Now, they're getting the picture," says Major Antonio Menga, head of Italy's six-year-old environmental police force, which has collaborated with magistrates to crack several trafficking gangs.

The question is whether Italy's tardy offensive can combat an industry that has grown to such frightening proportions. "Italy is way behind [the rest of Europe] in dealing with refuse," says Anacleto Busá, a chemist who was consulted by a parliamentary commission investigating trafficking.

Law-enforcement officials battling traffickers testify to the daunting dimensions of the problem. In October, the forestry police released the results of an aerial survey identifying 705 highly toxic illegal dump sites across almost 7 million square meters of territory, from the verdant farmlands north of Naples to the rolling hills of Umbria to the Adriatic coast near Bari. The number of illegal dumps, including all types of waste, tops 4,000.

Medical experts, meanwhile, are trying to figure out just how deadly the sites are. On Mar. 28, the public prosecutor's office in Santa Maria Capua Vetere near Caserta in Campania will host a national conference to present preliminary evidence of health problems linked to toxic waste. "There is no doubt about the connection between illegal toxic dump sites run by the eco-Mafia and the increase in fatal illnesses" in the Caserta region, says Carmine Antropoli, a surgeon and cancer specialist at southern Italy's largest hospital, Cardarelli, in Naples. Antropoli has studied the sharp increase in leukemia, colon cancer, and stomach tumors in patients living in the area between Naples and Caserta. Physicians and investigators worry that illegal dumps containing toxins such as heavy metals are polluting groundwater and farmland. "We are pressuring health authorities to place a permanent observatory here to monitor the rate of tumors," says Donato Ceglie, a magistrate from Santa Maria Capo Vetere and a leader in Italy's battle against waste trafficking.

The estimated costs of cleaning up all of these sites range into the hundreds of billions of dollars. "What we have discovered is a fraction of what's out there," frets Renato Nitti, investigating magistrate in Bari, who arrested six businessmen in April on charges of trafficking and dumping more than 100,000 tons of waste. What's "out there" is enough to give health officials nightmares. Roughly 11 million tons of industrial waste in Italy disappear every year, according to Italy's Waste Industry Employers' Association (FISE). That's the amount produced by factories but whose disposal is not accounted for by legitimate waste handlers. Some 300,000 tons of this missing refuse are highly toxic, FISE says. "This is the type of damage you start to pay for 20 to 30 years later," says Asti investigating magistrate Luciano Tarditi, who uncovered the Pitelli dump near La Spezia, one of the worst in Italy.

Every country in Europe can point to cases of illegal dumping, but Italy stands out. "It's the direct control of organized crime that makes Italy different," says Roberto Ferrigno, EU Policy Director at the European Environmental Bureau in Brussels, who has worked as an adviser to Italy's National Association for the Protection of the Environment (ANPA). Criminal groups control up to 30% of the country's waste-management business, according to Italy's highly respected Antimafia Commission.

All of the country's notorious names have a hand in the trade: the Sicilian Mafia; the Camorra from Naples; the 'Ndrangheta, which dominates in Calabria; and the Sacra Corona in Apulia, says Pier Luigi Vigna, head of the Antimafia Commission. Prosecutors say the same mob-linked companies that dump also bid for contracts to clean up the sites. "Companies use cover-up names to appear clean but are linked to organized crime. Then, they get the state contracts for cleanup," says Vigna.

Industry is part of the problem. The price for environmentally responsible disposal of the most dangerous industrial waste averages roughly $1 a kilo, say managers of legitimate waste companies, while traffickers may bid as low as 10 cents per kilo. The temptation to accept such a low bid is huge. "If industry wants to reduce its costs, it just closes its eyes," says Luciano Morelli, the general manager of Ecobat, a $500 million Milan-based business that disposes of used batteries. Corrado Scapino, vice-president of FISE and president of Barricalla, a waste-disposal company outside of Turin, says illegal competition from traffickers siphons off the business needed to justify investment in modern waste-management facilities.

That's why, in the Ecoverde case, Spoleto prosecutor Manuela Comodi wants to force industrial bosses from northern Italy who used Ecoverde's services to testify. If she can prove execs knowingly participated in waste trafficking--a tough hurdle--they can do jail time. Even hauling them in to testify may be a deterrent. "It is impossible that companies had no idea their waste was being disposed of under the table. The prices were too low to be credible," says Comodi.

To confuse authorities, criminal gangs pass their cargo off several times or store waste materials temporarily in centers designed for treatment. Middlemen falsify documents and send the cargo on to another way station as "nonhazardous" waste. Eventually, most trucks head south to less populated regions. Connecting all the dots in these cases takes painstaking investigative work. One police officer showed BusinessWeek a chart of some 50 interlinked boxes, each representing a criminal entity linked to trafficking. Illicit companies dealing with waste "disappear and reappear, making it one of the century's most difficult crimes to combat," says Senator Russo.

Throw in the heavy tactics of the mob and judicial red tape, and the results are discouraging. Take the example of Pitelli, a hillside town on the Ligurian coast, where magistrates say gangs started dumping in the 1980s. In 1995, Roberto Zanelli (not his real name), a resident of nearby Ruffino, struggled to obtain information from local officials about the health hazards of a dump site's rancid odors and eye-stinging emissions. Ignored, Zanelli had his own tests done on soil samples and went public with the results: dense concentrations of heavy metals, dioxins, and poisonous pharmaceutical residues.

Zanelli paid heavily for insisting on the truth. After receiving anonymous threats, his home was shot at by unknown assailants. He shot back with a hunting rifle. Several weeks later, he was beaten badly and hospitalized, and he remains fearful of retribution. "Anyone daring to speak out was silenced, sidelined, or bought off," Zanelli says. Other citizens received similar treatment. In 1996, their worst worries were confirmed as police unearthed mountains of lethal waste at the Pitelli site, including antiradar paint residues from military equipment.

Prosecutors say Pitelli--now declared a national disaster area--was a key end station for criminal waste trafficking, a gold mine of a business that generated some $500,000 a day in revenue, probably for gangs linked to the Camorra. More than 40 local officials were eventually charged by prosecutors with complicity in the disaster, and 10 were held in prison after investigating magistrates and forestry police unearthed evidence of bribery and collusion with public offices, administrators, and politicians.

A 1998 parliamentary report states that local authorities were not clear or cooperative with magistrates' investigations. Officials in Pitelli didn't respond to requests for comment from BusinessWeek but have told the Italian press that the dump's owner and the prime defendant, Orazio Duvia, is responsible for the wrongdoing. Andrea Corradino, Duvia's lawyer, didn't respond to requests from BusinessWeek for comment. But he has stated publicly that his client is "absolutely innocent of all charges and operated according to regulations." Duvia blames previous owners of the site for any toxic waste it contains.

The Pitelli investigation looked liked the start of a crusade against the traffickers. Yet seven years later, because of Italy's notoriously slow judicial system and a transfer of the case to another venue, the trial hasn't even begun, and 80 of the 100 accused individuals can no longer be tried because the statute of limitations has expired. "The atmosphere is degrading and disheartening," says a member of the citizens' committee in Pitelli.

Often, serious damage remains strangely visible and invisible at the same time. In the mid-1990s, in a 300 sq. km. area of Campania around Caserta, 152 lakes suddenly appeared as gangs excavated sand for their cement business and used the holes that filled with groundwater as dump sites for waste. Despite years of hand-wringing, an eight-year state of emergency, and multiple visits to the region by Parliament members, little has been done to precisely assess the levels of pollution or launch a cleanup project. Officials from ANPA, the national agency responsible for coordinating environmental monitoring, say pollution data from much of Campania--and most of the country's southern regions--is simply nonexistent. The reasons are lack of resources to monitor pollution levels and pervasive mob influence.

One troubled health official told BusinessWeek how the power of organized crime impeded his work. He believes that a 400% rise in some cancers from 1996 to 1999 in parts of Campania is linked to industrial toxins at dump sites that have been seeping into the local groundwater and the food chain. Health authorities have shut down more than 27 wells polluted with heavy metals and bacteria since early 2002 and confiscated 6,000 sheep that were producing dioxin-contaminated milk. But when the official and others sought to determine the degree of public-health danger from the sites, he says they were suddenly transferred or demoted and warned to keep quiet. He claims that local authorities responsible for testing the level of pollutants in the water table and soil were either bribed or intimidated to alter their safety standards, making local pollution levels appear to be no longer dangerous.

Officials from Campania's two-year-old Regional Agency for Environmental Protection (ARPAC), the local unit responsible for monitoring and analyzing the polluted sites, say interference from organized crime is negligible and controls are being carried out effectively. "We have a map now of damaged areas and an idea of what needs to be done," says Antonio Tosi, director general of ARPAC. "There may be isolated cases [of intimidation or bribes], but my employees are up front." The World Health Organization and cancer specialist Antropoli both say that epidemiological studies need to be done to pinpoint the exact cause of the rise in cancer rates.

Meanwhile, cleanup costs keep mounting. In the tiny Umbria hamlet of Montone, the town's mayor, Franco Carpecci, spent $200,000, or 25% of his town's annual budget, to haul away waste from one farm after its owner received 80 truckloads of "mulch" from Ecoverde. When the cash-strapped farmer refused to pay for the removal of the stinking material, the town became legally responsible to protect residents from health hazards. Carpecci, who has filed a civil lawsuit against the farmer to recuperate cleanup funds, called the environmental crime "a nightmare that still keeps me awake at night." Some farmers, Galli included, may face prosecution for accepting the fertilizer, thus aiding and abetting the scheme.

Police and magistrates say tougher laws and penalties are vital to prevent future disasters like that in Umbria from happening again. Environment Minister Altero Matteoli counters that current laws have plenty of bite. He wants all waste to be treated locally. That would block the transport of waste to mob-influenced areas. Matteoli also wants to boost the number of incinerators, which would reduce the total volume of waste headed for dump sites. The National Waste Observatory, a unit of the Environment Ministry in Rome, points to experiments with computer chips that identify waste as it leaves the factory and eliminate paper documents, which are easily falsified. "Better controls have to be carried out at the place of origin," says Massimo Ferlini, the Observatory's president.

Italy's beleaguered frontline combatants--magistrates, carabinieri, and the forest police--toil on, even as the odds remain stacked against them and environmental activists warn of dire consequences. "A country that can't manage to outlaw toxic dumping has no future--not for itself and not for investors," says Enrico Fontana, national secretary at Rome-based Legambiente, an environmental group. In Italy, that message is only slowly starting to sink in.

By Gail Edmondson in Caserta and Kate Carlisle in Trevi

    Before it's here, it's on the Bloomberg Terminal.