BT’s Italian unit and a network of staff have been accused of inflating revenues and concealing losses of £250 million in a sophisticated fraud. On trial alongside the company are 20 defendants, including two former executives. All the accused deny charges of false accounting alleged to have been carried out in 2015 and 2016.

Milan prosecutors have alleged that a network of BT Italy employees inflated revenues, faked contract renewals and invoices and invented bogus supplier transactions to disguise the unit’s actual financial performance. BT was warned of trouble at its Italian division by a whistle-blower in 2016 when former chief executive Gavin Patterson was still in charge. It disclosed problems to investors in October that year, writing off £145million from BT Italia’s value due to what was described as inappropriate management behaviour. But following a forensic review by outside accountants at KPMG, BT was forced to announce an even bigger £530million write down in January. 2017. It sent shares tumbling and wiped £8billion off the company’s value on its worst-ever day on the stock market.

The KPMG review found evidence of inefficient accounting processes and control and what was described as a ‘loss of balance sheet integrity’. While BT insists that it was an ‘injured’ party in the incident, a report by the Italian Police alleges that London executives pressured managers in the Italian subsidiary to hit targets and encouraged aggressive and knowing wrong accounting processes.

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