Exclusive: BT execs knew of accounting fraud in Italy unit - prosecutors

By Emilio Parodi

MILAN (Reuters) - A preliminary criminal investigation into an accounting scandal at the Italian unit of British Telecom (BT) has alleged that three top executives of the group were aware of bookkeeping fraud at the unit, according to a document prepared by Italian prosecutors.

The document, which wraps up the preliminary investigation, alleges that a network of people in BT Italy exaggerated revenues, faked contract renewals and invoices and invented bogus supplier transactions in order to meet bonus targets and disguise the unit's true financial performance.

The closing of the preliminary probe is the final step before prosecutors press charges against the suspects. Under Italian law those under investigation now have three weeks to show why they should not be charged.

In the document, handed this week to parties involved in the investigation and seen by Reuters, prosecutors for the first time have named group executives as suspects in the case, though the prosecutors say all three have left BT since the scandal surfaced.

The document also lists BT Italy as a subject of the investigation, no longer as a damaged party.

BT spokeswoman Gemma Thomas declined to give an immediate comment.

In the document, prosecutors name Luis Alvarez and Richard Cameron, respectively former chief executive and former chief financial officer of BT Global Services, and Corrado Sciolla, formerly BT's head of continental Europe, among an expanded list of 23 suspects.

The three are accused of setting unrealistically high business targets and of complicity in false accounting at BT Italy, which formed part of the Global Services division, according to the document.

A lawyer acting for the three could not be immediately reached for comment.

(Writing by Silvia Aloisi; Editing by Mark Bendeich)