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Suit-and-tie criminals step into Italy’s loans vacuum

May 4, 2009

By Giulia Segreti and Guy Dinmore in Rome

Published: May 4 2009

Fausto Bernardini’s very Italian dream of building his town’s five-a-side soccer team into a cupwinning club ended, after a long nightmare, on the day when his financial backers pinned him against the gate of his home and threatened to take away his young daughter.

That was the moment he realised he had to free himself from the clutches of the loan sharks who were always squeezing him for more. “You turn to them because you do not have liquidity and banks turn you down,” explains Mr Bernardini, of Settecamini, just outside Rome. “In 18 months, €10,000 turned into €300,000,” he says.

During that time, spent desperately trying to borrow from anyone he could to repay the mounting debts, he lost everything – “my soccer club, all my family relationships and social contacts.”

Mr Bernardini, 46, is one of 2m Italians known to have fallen into the trap of usury. Just recently in Rome, Antonio Landolfi, 42 years old and heavily in debt, set fire to himself outside a bingo hall. He could not afford health treatments needed by his son. On the day of his suicide his bank had refused him a loan.

Italy’s conservative banks are lending even less than normal as the liquidity crisis bites deeper, forcing more private individuals and entrepreneurs to resort to loan sharks. Those who lent to Mr Bernardini were local merchants, who are being prosecuted for usury. Mafia gangs, flush with cash from the narcotics trade, are also increasingly involved, mainly in their strongholds in the poorer south.

According to Eurispes, a think-tank, the initial loan is relatively small: €5,000 ($6,640, £4,450) in 43 per cent of reported cases. Interest rates usually range from an annualised 120 per cent to 240 per cent, but can reach 500 per cent. Cnel, a government advisory body, estimated the total usury market in Italy at €12.5bn in 2006.

The market is believed to be expanding, although it is thought that most cases go unreported. In 2008 there were only 337 prosecutions for usury, 10 per cent fewer than the year before, Eurispes says in its Italy Report 2009.

“It’s a sort of Stockholm syndrome – you become dependent on your usurer and see him as your sole way out,” says Mr Bernardini.

Italians still borrow relatively little compared with most Europeans(in contrast to the government, which is the world’s third most indebted).

However, personal debt is rising fast. According to the Bank of Italy, it totals €350bn, equal to 49 per cent of gross domestic product. This modest debt level – compared with big-spending Britain, where the figure is more than 100 per cent of GDP – is partly because 3m Italian families do not have access to credit. Most of them live in the south.

But experts are warning that an estimated 1.4m families could fall into the hands of loan sharks in the next year.

The highest number of reported cases of usury is in Naples, followed by Bari, also in the south, then Turin, the industrial hub of the north-west. Aside from families, victims tend to be small companies, 48 per cent in the commercial sector and 10 per cent artisans.

Lino Busà, president of Sos Impresa, a business association, says borrowers are likely to turn to loan sharks to avoid early stages of bankruptcy. According to the Chambers of Commerce, bankruptcies more than doubled in 2008 to nearly 13,000.

Mr Busà believes the Mafia accounts for only 10 to 15 per cent of usury. However, he adds: “It is turning into an associative crime, with real networks being created. On average each usurer has 80 to 100 clients.”

The traditional figure of the “neighbourhood” single usurer is being replaced by “criminal organisations or suit-and-tie professional investors, who have powerful friendships”.

Nicola Zingaretti, centre-left president of the province of Rome, sees fast-growing towns just south of the capital, such as Marino, Anzio and Nettuno, becoming more prone to usury. “It imposes itself in broken-up urban fabrics like these, where social networks are not tight,” he tells the Financial Times.

The infiltration of Rome by criminal gangs and loan sharks is worrying Mr Zingaretti, who has been sounding the alarm in the media. Recently, a restaurant near the Spanish Steps and a well-known café were closed because of suspected links with Calabrian Mafia leaders.

“The economy of Rome and its province has grown steadily in the last years, not in the manufacturing sector but in the services sector and in commerce. This has allowed the easy penetration of a new, non-violent, Mafia,” Mr Zingaretti says.

Money-laundering can accompany usury as “bad” money works its way into the system, sometimes used by loan sharks and their protectors to take over businesses that cannot repay debts.

Mr Bernardini’s harrowing experiences led him to start a campaign to advise people on escaping the clutches of loan sharks. He says crimes are difficult to prove.

“Clear and certain pieces of proof are needed to nail your usurer, who works in darkness,” he said. There is also a lack of solidarity among victims. Public opinion tends to condemn them for what they have done.

Anti-Mafia campaigners allege that banks are sometimes complicit, denying loans to customers and then pointing them in the direction of loan sharks.

“A big step forward would be made if more stringent banking rules were applied and banks had the duty to report anomalous transactions,” said Mr Busà. “But let’s not forget that usurers are great clients for banks.”

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