Rome police arrest former Cirio chief

Italian police yesterday arrested Sergio Cragnotti, the former head of insolvent food firm Cirio, as prosecutors named 25 bankers in a probe into the multinational's meltdown, judicial sources said.

Cirio, a household brand for millions of Italians, defaulted on more than one billion euros of bonds in late 2002, an insolvency which has since been dwarfed by the multi-billion-euro accounting scandal at Italian dairy group Parmalat.

Cragnotti's arrest warrant, obtained by Reuters, said Cirio's shock slide into bankruptcy was triggered after payments worth some €394 million were made to partners of Cirio's parent company. These included several Italian banks and Parmalat.

The twin corporate failures of Cirio and Parmalat, which pulled the rug from under 165,000 Italian retail investors, according to press reports, have increased pressure on magistrates to tie up the Cirio inquiry and crack down on possible fraud.

Police swooped on 64-year-old Cragnotti at his Rome estate in the early hours yesterday morning, before plain clothes police officers escorted him to a prison in the capital.

His lawyer called the arrest "completely useless" and said it was prompted by political and media pressure after Parmalat.

Cragnotti, who bought Cirio in 1994 after he was caught up in an unrelated corruption scandal, denies wrongdoing.

The accelerated investigation into Cirio has turned up the heat on Italian banks, now under scrutiny for their role in the Cirio and Parmalat debacles as well as for what critics say were aggressive sales of Argentine bonds to retail investors.

In the arrest warrant, prosecutors laid blame for the bankruptcy on payments made by firm Cragnotti & Partners to groups including Banca di Roma, now Capitalia, Banca di Napoli, now part of Sanpaolo IMI, Monte dei Paschi di Siena, Parmalat, Swiss bank UBS and the Brazilian Ferreira family.

UBS, Banca di Roma and Banca di Napoli were also named in a list of six banks favoured by Cirio when it repaid debts. Capitalia Chairman Cesare Geronzi, formerly head of Banca di Roma, has already been named in a separate Cirio probe.

Those transfers, made in 2000-02, were worth just under €600 million in all and also included Banca Popolare di Lodi, Mediocredito Centrale, now Capitalia unit MCC and Banca Nazionale del Lavoro, the warrant said.

Separately, prosecutors in the northern city of Monza added to bankers' troubles, naming 25 managers and bank officials in their investigation, judicial sources said.

Officials named in the Monza probe include former Banca di Roma Deputy Director General Alberto Giovannini, Meliorbanca Chairman Pierdomenico Gallo and Rasfin Chief Executive Officer Roberto Notarbartolo.

Rasfin said yesterday it sold Cirio bonds only to institutional investors and denied wrongdoing. Other institutions were not immediately available for comment.

In Rome, Cragnotti's lawyer Giulia Bongiorno said he had expected the arrest "for a while", but questioned its timing.