BT bosses hid £530m Italian fraud scandal

THREE BT employees raised the alarm about its £531m Italian fraud problems a year before the scandal was made public, it is claimed.

Staff at its Italian arm were said to have warned their supervisor in Madrid long before the telecoms giant told investors about the irregularities.

The reports raised questions over how promptly BT started investigating the fraud, which wiped almost £8bn off its value when it was made public. And it piles fresh pressure on BT chief executive Gavin Patterson over how the firm responded to the scandal.

The claims, revealed by the Reuters news service, also alleged a culture of bullying, with staff criticised and shouted at for failing to meet targets.

BT has since sacked half a dozen managers, including its former BT Italy chief executive Gianluca Cimini.

Markets were stunned in January by the group’s admission that ‘inappropriate behaviour’ caused it to exaggerate its profits in Italy.

BT had first warned shareholders about the fraud last summer, but the firm later admitted the problems were ‘far greater than previously identified’, sparking a wave of panic selling.

At the time, Patterson said BT could not have spotted the problem sooner as Italian managers kept London bosses in the dark. But Reuters has cited a source who said he and two BT Italy colleagues told BT’s head of European sales, Jacinto Cavestany, in late 2015 they were worried something was wrong. They also complained of bullying by local management.

But BT said Cavestany had no recollection of the issues having been raised with him.

Last night, details of how the deception worked was laid bare by sources. They said a network of Italian workers exaggerated revenues from BT-installed phone lines, faked contract renewals and invoices and invented bogus transactions to meet targets.

These were designed to disguise the unit’s true financial performance. BT Italy’s purchasing office made fake purchase orders to suppliers with no intention of receiving goods, according to the sources. It would then suddenly cancel the order and ask the supplier to issue a credit note as a refund, they said.

Reuters said another employee claimed that staff made use of multiple internal accounting systems to fake income.

The sources said the cover-up took place in an environment where workers were shouted at for failing to meet targets. One said Cimini dipped a finger into a glass of water and said: ‘What happens when I put my finger inside this glass and take it out? Absolutely nothing – the same as if you left the company.’

Cimini denied the incident took place. BT said it had received complaints of bullying at BT Italy in 2016, adding: ‘Human resources representatives visited our Italian operations and looked into the issue. BT does not tolerate bullying or breaches of our policies and... a number of BT Italy’s senior management have subsequently left the business.’

BT said it became aware of the financial irregularities after receiving reports in summer 2016.