Frauds: Shedding Light on Black Funds

Italy's giant complex for state ownership called the Institute for Industrial Reconstruction covers nearly half the country's manufacturing output—1,200 companies and 500,000 workers. But I.R.I, cannot control its top executives. At dawn one day last week in Rome, two former I.R.I, officials were arrested on charges of false financial disclosure and embezzling $125.4 million from state-owned companies.

Held were Fausto Calabria, 62, now chairman of Mediobanca, Italy's most powerful merchant bank, and Sergio De Amicis, 66, former president of Condotte, the state-controlled construction firm. Police said that between 1972 and 1982, when the two held top positions at I.R.I.,...

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