An investigation has been launched into BT regarding the allegations of questionable accounting surrounding the Italian division of the company.
Prosecutors in Milan confirmed that the probe would focus on “false accounting and embezzlement” within the company.
The investigation comes after the BT share price fell 19% in early trading on Tuesday 24, after the company was forced to devalue the Italian divsion by £530 million citing years of “inappropriate behaviour” in its accounting department which were “far greater than previously realised”. The drop in share price is expected to wipe an estimated £7 billion from the company’s value.
The case is being handled by famed Italian prosecutor Fabio De Pasquale, most notable for having led the case against former Italian Prime Minister Silvio Berlusconi for corruption in the 1990’s.
News of the scandal prompted a culling of senior executives, followed by the announcement that BT President of Continental Europe Corrado Sciolla would be resigning after taking “executive responsibility” for the fiasco.
Prosecutors have not yet disclosed whether the probe will focus on specific individuals or the company. However, the infrastructure which allowed this to happen is alleged to be extremely complex involving false invoices and fabricated companies in an intricately designed plan to stay undetected.
Italian prosecutors are the first external agency to take interest in the situation as the British Serious Fraud Office said: “We have noted the news. We cannot confirm or deny our interest.”
BT was expected to devalue the company after a whistle blower came forward last summer, but the recent findings have tripled initial estimates. The information was released shortly after the company issued a profit warning regarding it’s UK public sector.
Sam McHugh, an analyst at Exane BNP Paribas, told the FT: “Over the past seven years, BT has built up a reputation as a ‘quality’ telco. Thus, BT’s year of underperformance has too often been blamed on events out of its control — structural separation/pension/Brexit. Yesterday’s profit warning changes things.
“BT now has a lot of investor trust to rebuild.”