POWER OF INTELLIGENCE

Insight Center: Publications

New Italian Legislation Addresses Corruption

Authors: Louis J. Freeh, Gregory A. Paw and Sergio Salerno

11/28/2012

This material was prepared for UNICOST, Associazione Nazionale dei Magistrati - Distretto di Roma.

PDF available in Italian

In recent weeks, the Italian Parliament took an important step to confront corruption by passing a new law intended to address influence peddling, as well as corruption among companies in the private sector and enhancing penalties for other bribery offenses. Coming at a time when corruption scandals have been front page news across Italy, the legislation is seen as an important component of Prime Minister Mario Monti’s efforts to reform public finance, improve foreign investment and enhance public confidence in government. The new law becomes effective on November 28, 2012, the same day a group of magistrates will meet in Rome to send a clear message that the historical tolerance of corruption cannot continue.

The new law prohibits the exploitation of a relationship with public officials where a benefit is offered, requested or received in return for unlawful favors. The law also increases prison sentences for public officials convicted of bribery, corruption in the exercise of a public function, corruption by act contrary to official duties and corruption in judicial proceedings. Another new crime added by the law addresses private corruption among commercial organizations, prohibiting the bribing of key corporate leaders such as directors or members of the supervisory board as well as acceptance of bribes by these leaders when they act, or fail to act, in breach of their fiduciary duty.

To enhance transparency and trust in government, the law requires local and regional public offices to institute an anti-corruption plan and renew it every year. Public administrations will need to conduct a risk assessment to analyze causes of illicit behaviors and indicate the measures to be implemented for preventing and fighting these risks. A senior executive will be tasked to implement the plan and enact appropriate procedures as well as training for employees in high-risk sectors, such as disposal of waste, rental of certain machinery and extraction of dirt and ground materials. Increased visibility will be required for functions including procurement, budgeting and the issuing of public licenses. Incentives and protections for whistleblowers also will be required.

The administration also appears ready to pursue other legislation, such as a law to empower an anti-corruption commissioner as well as proposed changes to the regional government budgeting process.

Corruption costs Italy an estimated €60 billion ($78 billion) a year according to Italy’s Court of Accounts, a body of magistrates that audits public finances. “Italy badly needs a strong legal framework to fight corruption. This law is a good start,” anti-corruption watchdog Transparency International said in a written statement issued after passage of the new law. “The law has some, if not all, of the elements required to overcome the rampant cronyism and influence peddling in Italian politics.”

Pepper Hamilton can assist companies to understand how to comply with the new Italian anti-corruption legislation, as well as a broad range of other anti-corruption laws that apply to international businesses. Led by former U.S. Federal Bureau of Investigation Director Louis Freeh, we provide experienced guidance to ensure that our clients’ compliance and risk management programs are deterring and detecting potential anti-corruption issues. We evaluate and design effective programs to meet specific risks of our clients’ international operations. We also conduct internal investigations of suspected corrupted payments, and design remedial strategies to best protect our clients.

Our practice group includes experienced professionals seasoned by years of running law enforcement agencies and counseling international businesses on sophisticated compliance issues. Engaging Pepper sends a strong signal that a company is committed to conducting its international business ethically and properly.

Louis J. Freeh, Gregory Paw and Sergio Salerno

The material in this publication was created as of the date set forth above and is based on laws, court decisions, administrative rulings and congressional materials that existed at that time, and should not be construed as legal advice or legal opinions on specific facts. The information in this publication is not intended to create, and the transmission and receipt of it does not constitute, a lawyer-client relationship.