Barclays’ attempts to shed its reputation for aggressive tax avoidance suffered a setback yesterday when three of its executives were charged with tax fraud in Italy.
The Barclays executives, who deny the charges, were among 20 people ordered to stand trial by a judge in Milan on charges of taking part in an alleged plan by the Italian bank UniCredit to evade €245 million (£198 million) in tax.
The defendants include Alessandro Profumo, the former UniCredit chief executive, who now chairs another of Italy’s biggest banks, Banca Monte dei Paschi di Sieno.
Sixteen other past and present executives of UniCredit were also charged.
Barclays is alleged to have devised a scheme — nicknamed “Brontos” — by which UniCredit improperly described income as dividends, which are treated more favourably under Italian tax law. The alleged events took place in 2007 and 2008. Barclays, which under its chief executive, Bob Diamond, is trying to improve the bank’s image as a good corporate citizen, denied any wrongdoing, saying that it stood by the executives, who still work for the bank, and would finance their defence.
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“Barclays takes its responsibilities as a corporate citizen very seriously, complying with taxation laws in the UK and in all the countries where we do business,” it said. “Barclays continues to believe firmly that it and the individuals involved have not violated any tax or other laws in Italy, and we continue to support fully the individuals named in this matter.”
The three executives are Stefano Filippi and Rupack Chandra, who work in the Structured Capital Markets division of the bank, and Maria Celeste Mariotti, of its Milan office.
The charges come less than four months after Barclays was accused by the British Government of two “highly abusive” tax avoidance schemes which would have cost the country £500 million had they not been blocked. One was a contrivance to avoid tax on a bond buyback, the other was an attempt to claim a tax credit on income which had not been taxed in the first place.
Mr Diamond has defended the bank over these allegations, arguing in a letter to the Treasury Select Committee that Barclays had been unfairly singled out because other banks had used the same technique to buy back bonds and and not been pursued by Revenue & Customs. It had also voluntarily disclosed the scheme to HMRC.
UniCredit’s former chief executive denies any wrongdoing. Mr Profumo was ousted from UniCredit in 2010 after falling out with the board. During his 13-year tenure he embarked on an expansion and acquisition spree which left the bank — Italy’s largest — vulnerable when the crisis hit in 2008.
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He said: “I await public judgment confidently and impatiently as I am certain of the correctness of all my activities” UniCredit said that it was confident the conduct of all its employees, past and present, would be vindicated in the trial, which is due to start on October 1.