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As Italy's Banks Tighten Lending, Desperate Firms Call on the Mafia

By Mary Jordan
Washington Post Foreign Service
Sunday, March 1, 2009

ROME -- When the bills started piling up and the banks wouldn't lend, the white-haired art dealer in the elegant tweed jacket said he drove to the outskirts of Rome and knocked on the rusty steel door of a shipping container.

A beefy man named Mauro answered. He wore blue overalls with two big pockets, one stuffed with checks and the other with cash. The wad of bills he handed over, the art dealer recalled, reeked of the man's cologne and came at 120 percent annual interest.

As banks stop lending amid the global financial crisis, the likes of Mauro are increasingly becoming the face of Italian finance. The Mafia and its loan sharks, nearly everyone agrees, smell blood in the troubled waters.

"It's a fantastic time for the Mafia. They have the cash," said Antonio Roccuzzo, the author of several books on organized crime. "The Mafia has enormous liquidity. It may be the only Italian 'company' without any cash problem."

At a time when businesses most need loans as they struggle with falling sales, rising debt and impending bankruptcy, banks have tightened their lending to them.

Italian banks, which for years had been widely criticized for lending sparingly to small and medium-size businesses, now have "absolutely closed the purse strings," said Gian Maria Fara, the president of Eurispes, a private research institute.

That is great news for loan sharks. Confesercenti, the national shopkeepers association, estimates that 180,000 businesses recently have turned to them in desperation. Although some shady lenders are freelancers turning profits on others' hard luck, very often the neighborhood tough offering fat rolls of cash is connected to the Mafia, the group said.

"Office workers, middle-class people, owners of fruit stands, flower stalls are all becoming their victims. . . . We have never seen this happen," said Lino Busa, a top Confesercenti official. "It is as common as it is hidden."

Many experts say organized crime is already the biggest business in Italy. Now, Fara said, the untaxed underground economy is growing even larger. "Certainly I am worried," he said. "The banking system doesn't work, and the private one that is operating is often managed by organized crime."

The consequences for Italy and its 58 million people are huge, Fara said: "Stronger organized crime means a weaker state."

Nino Miceli, an adviser to Confesercenti, said the Mafia's goal is to take over the struggling businesses. When the loans, typically at interest rates in triple digits, are not repaid, the threats of violence begin, and restaurants, grocery stores and bars become the property of criminal gangs.

"As we sit here in this cafe," he said over an espresso near the Colosseum, "do we really know who owns it?"

With a burgeoning portfolio of properties and businesses, the Mafia becomes more entrenched in the economy and has more outlets to "clean their money," Miceli said.

Confesercenti estimates in a new report that organized crime syndicates -- including Naples's Camorra, Sicily's Cosa Nostra, Calabria's 'Ndrangheta -- collect about 250 million euros, or $315 million, from retailers every day.

Some of that money is the classic "pizzo," or protection money demanded of business owners. Miceli said his auto dealership was burned down when he refused to pay. But the mob's booming business, he and others agreed, is loan-sharking.

"The loan sharks are growing like mushrooms and becoming bolder and more visible," Cardinal Severino Poletto, the archbishop of Turin, was quoted as saying in La Stampa newspaper last month. "They grow like mushrooms when the time is right, and unfortunately, it's evident that the time is right now."

Many victims get tangled up with the mob by believing that they can find a "good" loan shark.

Fausto Bernardini, 46, ran an amateur soccer club in Rome that depended on money from sponsors, including a real estate company. But in the grim economic climate, the sponsors pulled out.

With players, coaches and fans depending on him to keep their beloved club afloat, Bernardini asked a local businessman for a loan. He, in turn, recommended another man, who handed Bernardini 9,000 euros, or about $11,400, at 120 percent annual interest.

"I knew it was steep," said Bernardini, a burly father of two with a deep passion for soccer. He never imagined borrowing from a loan shark but said he had no choice.

He said he planned to repay the money quickly. His winning team, he hoped, would attract new sponsors. But no fresh funds came, and he fell behind in payments.

One day a man jumped him on the street, shoved him into a car and drove him around for an hour, threatening to tie him to a tree in the woods until payment was made, he said. Later, another man came to his home and threatened to break his legs and harm his daughter.

"Then I went to the police," he said. In his case, two men were convicted and sent to jail last year.

The Mafia is most famous in Sicily and southern Italy, but its tentacles spread throughout the country.

In Vigevano, a northern city of 60,000 near Milan, a group called Free Vigevano has helped nearly 100 people who had become entangled with the mob.

One of them, a 40-year-old salesman, said he got his desperately needed $15,000 -- but at 30 percent monthly interest. He met a man who was dressed in Versace, drove a Mercedes convertible and handed him the cash in a bar.

The salesman said he has since moved away because of threats from the loan shark. Once when he made a partial payment of more than $5,000, the man scoffed at him and said that sum "had as much value as a cup of coffee."

The salesman said he blames banks for pushing people like him into the arms of the Mafia.

"If they would be a bit more open with their credit, many people wouldn't fall into this trap," he said. "They only give money to those who already have it."

Usury, charging exorbitant interest rates, is a crime in Italy. The legal rates lenders charge depend on the type of loans and are fixed by the government every quarter, but generally, charging more than 30 percent a year is considered illegal.

But convicting a loan shark, commonly called "strozzino," one who strangles you, or "cravattaro," one who grabs you by the necktie, can be difficult.

For one thing, said Fausto Mario Amato, a lawyer who defends Mafia victims, there is rarely a paper trail.

Amato said police are investigating Mauro, the man who worked out of the shipping container and lent money to his client, the art dealer.

Interviewed in his art gallery in Rome, the soft-spoken art dealer spoke on the condition that he not be identified. With his wife on one side of him and his lawyer, Amato, on the other, he sat at his desk in his softly lit gallery. If clients knew he had gotten tangled up with a loan shark, he said, he would "lose social prestige and honor."

At his first meeting with Mauro, he said, he wrote out a check for 15,000 euros, or $19,000. He signed it, dated it so it could be cashed in 30 days, and left the name blank, as instructed.

Mauro deducted his first month's 10 percent fee, and handed him 13,500 euros in a wad of 50 euro bills.

"I had hoped I could pay him back in a month," he said, shaking his head.

Over and over he drove to the lot where Mauro also leased heavy construction equipment. He pulled in beside a Porsche and Lamborghini and gave Mauro whatever cash he had toward the escalating interest payments.

When he couldn't keep up, the threatening calls at night started. "Be careful," the voice would say.

That's when he called police and hired a lawyer.

"How did I get to this point?" he said, his tired eyes tearing up.

He said he wanted to tell his story because, as the economic crisis deepens, more and more lives are being destroyed by loan sharks.

"I could have decided to go bankrupt and not gotten involved with all this," he said. "But that is a hard decision to make."

Special correspondent Sarah Delaney contributed to this report.

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