Telecom Italia S.p.A.: TELECOM ITALIA SHAREHOLDERS' MEETING CONCLUDED -Settlement approved with Carlo Orazio Buora and Riccar..
18 Oktober 2012 - 7:35PM
Italian Regulatory (Text)
PRESS RELEASE
TELECOM ITALIA SHAREHOLDERS' MEETING CONCLUDED Settlement approved
with Carlo Orazio Buora and Riccardo Ruggiero
Rozzano (MI), 18 October 2012 The Shareholders' Meeting, chaired by
Franco Bernabè, approved today the dispute settlement, pursuant to
article 1965 of the Italian Civil Code, with former Executive
Directors Carlo Orazio Buora and Riccardo Ruggiero, and therefore
the settlement of the corporate liability action against them, for
the sums of 1 million and 1.5 million euros respectively. The
settlements are full and final. With respect to Riccardo Ruggiero
the settlement includes the Company's waiver of its right to join
the criminal proceedings in which the former Managing Director
faces charges of obstructing the public supervisory authorities
from performing their functions with reference to the mobile
customer base data provided to AgCom. In view of today's
Shareholders' Meeting, Consob asked the Company's Directors and
Statutory Auditors to provide further information, pursuant to
article 114, paragraph 5, of Legislative Decree 58/1998. Attached
are the notes published yesterday by the Company and the statement
made by the Chairman of the Board of Statutory Auditors during the
meeting.
Attachment 1 supplementary notes to the management report
Attachment 2 further information Attachment 3 statement by the
Chairman of the Board of Statutory Auditors The minutes of the
Shareholders' Meeting will be made available to the public at the
company head offices and on the web sites of Telecom Italia
(www.telecomitalia.com/tit/it/about-us/generalarchive.html) and
Borsa Italiana (www.borsaitaliana.it) as required by law. The
report on the voting results will also be made available on the
company web site within the next 5 days.
Telecom Italia Press Office
+39 06 3688 2610 http://www.telecomitalia.com/media
Telecom Italia Investor Relations
+39 02 8595 4131 http://www.telecomitalia.com/investorrelations
ATTACHMENT 1
With an order dated 15 October 2012 Consob asked for the
dissemination of some information, set out below, to supplement
that contained in the report explaining the Board's proposals to
the Shareholders' Meeting called for 18 October 2012.
Amount of costs/disbursements identified by Deloitte with reference
to the Security stream Consob asked that the amount of
"costs/disbursements identified by Deloitte" with reference to the
Security stream be identified, as was done for the prepaid card
affair. Reference is made to the information on the in-depth
analysis carried out by Deloitte in relation to the Security
Department in the period 2000-2007 already contained in the
Appendix to the report on corporate governance and share ownership
that accompanied the financial statements at 31 December 2010,
which may be consulted on the www.telecomitalia.com website,
Governance section/Governance System/Annual report on corporate
governance. As detailed in that report, and in the report to the
Shareholders, on completion of the review as part of the Greenfield
Project regarding the economic effects of the Security affair, the
consultant provided evidence of both costs/disbursements that are
or can be directly linked (mainly consultancy and professional
services costs), and costs/disbursements (even potential) that are
or can be indirectly linked (costs for legal fees, costs for
penalties, compensation already paid or that might be paid in
relation to cases and civil actions taken following the matter in
question). More specifically, the Deloitte report highlighted:
costs for consultancy and professional services associated with the
unlawful operations indicated in the indictment decree on 21
November 2008, amounting to approx. 7 million euros further costs
for consultancy and professional services not supported by the
appropriate documentation for the services rendered, for a total of
approximately 26 million euros; professional services costs of
approximately 12 million euros charged to the Company during the
tax assessment (and related interest and fines of approximately 5
million euros); costs for legal aid and other consultancy incurred
in relation to criminal and civil proceedings ensuing from the
matters in question, for an approximate total of 9 million euros;
costs incurred to define various positions (employees, Public
Administrations, plea bargaining), for an approximate total of 3
million euros; costs incurred for transactions with former
employees of the Security Department of 1,705 thousand euros; costs
for IT consultancy provided by KPMG of approximately 2.6 million
euros.
1
Deloitte also noted, but did not quantify, the presence of other
"potential economic risks", linked to requests for payment and/or
compensation in the context of pending cases. As explained in a
note to the report to this Shareholders' Meeting, the judgement
against the Company, jointly with F.C. Internazionale Milano
S.p.A., awarding the sum of one million euros to Mr Christian
Vieri, pronounced by the Milan Court in August 2012, should be
considered of this kind. It should be noted that the issues
considered by Deloitte in the description of the economic effects
of the Security affair (in the same way as for the Sim card affair)
can at most represent a guide to the sums that are hypothetically
liable to be requested as compensation for the pecuniary damage. In
the liability proceedings, however, the damage imputable to the
breach of Director's obligations must be proven in terms of the
subjective element (fault) and causal nexus. In these terms, the
amounts quoted are higher than those that might usefully be
formulated in any proceedings, which on the other hand could
also relate to the non-pecuniary damage suffered by the Company,
always provided that breaches by the Director were shown to be the
cause.
Bonuses paid to Mr. Buora and Mr. Ruggiero Consob has requested an
indication of the amounts of the bonuses paid to former Executive
Directors Carlo Orazio Buora and Riccardo Ruggiero during their
respective terms of office, and all other economic remuneration
paid in connection with the termination of such office. The
detailed table below was developed from the evidence in the Company
financial statements for the years 2001-2007 (available on the
www.telecomitalia.com website, Investors section, Financial
Statements and Reports channel) and, for severance pay, the report
on corporate governance that accompanied the financial statements
at 31 December 2007 (available on the www.telecomitalia.com
website, Governance section/Governance System/Annual report on
corporate governance). The amounts are indicated gross of sums
withheld by law; for Mr. Buora, they include the non-competition
agreement, with payment of 4 million euros gross, to be paid in
semi-annual instalments postponed starting from the end of the
employment relationship; for Mr Ruggiero, they include the short-
and long-term incentive plans and the non-competition agreement,
the payment of which was settled during his employment relationship
and, for the 2007 financial year, the remuneration paid as general
settlement and early retirement bonus in relation to his employment
contract with Telecom Italia.
Bonus/incentives (in thousands of euros) Carlo Orazio Buora
Riccardo Ruggiero 0 0 2,200 1,250 2,250 1,220 9,805
2001 2002 2003 2004 2005 2006 2007
1,201 1,844 5,817 4,527 1,639 15,685
2
Qualification of the amount of the settlment as not merely symbolic
Consob asks for clarification on the assessments at the base of the
assertion that the amount of the proposed settlements "would in any
event represent a form of compensation that is not merely symbolic
for Telecom Italia", indicating the main grounds for the legal
opinions obtained to support this statement. It should be noted
that the Board of Directors has carried out a discretional
assessment of the advantageousness of the proposed settlement, in
terms of cost/benefit trade-off (and time), comparing the solution
of the preventive settlement of the dispute out of court and the
solution of starting legal proceedings. In making this comparison,
the Board considered the opinion of the consultants, who confirmed,
based on their personal professional experience, that there is a
history of settlements concluded at values very much lower than the
amount claimed in the legal proceedings. In particular, they
provided details of historical cases (without the names of the
parties, for reasons of confidentiality) of settlements concluded
between companies established under Italian law against their
directors, all for individual amounts considerably less than one
million euros, against requests for damages for tens and sometimes
hundreds of millions of euros. Dissenting votes in the Board
Meetings on 1 August and 13 September 2012 As requested by Consob,
it should be noted that no dissenting votes were expressed on the
resolutions of the board concerning the convening of this
shareholders' meeting and the proposed resolutions submitted to the
shareholders for approval. For his part, Director Zingales
qualified his vote on 13 September 2012, explaining that he agreed
with the formulation of the settlement proposal to the Shareholders
Meeting, the settlement solution itself and the amount specified
for this purpose for Mr. Buora, but not the sum offered by Mr.
Ruggiero, which he considered too low when compared with the sum
offered by Mr. Buora.
This document has been translated into English solely for the
convenience of the readers. In the event of a discrepancy, the
Italian language version prevails.
3
ATTACHMENT 2
On the occasion of the Company Meeting which will be held on 18
October 2012, Consob has asked to provide the following
information, pursuant to Article 114, subsection 5, of Legislative
Decree no 58/1998.
Assessments made with regard to possible actions against Massimo
Castelli and Luca Luciani With reference to the proceedings for the
offence of preventing the public supervisory authorities from
performing their functions, with an application for the committal
for trial of Riccardo Ruggiero, Massimo Castelli and Luca Luciani,
as well as pursuant to Legislative Decree no 231/2011 of the
same Company (which subsequently plea bargained), it is confirmed
that Telecom Italia submitted an application to be a civil party in
the proceedings against the three physical persons charged. The
Board of Directors has not, to date, made further assessments. This
is without prejudice to the fact that, if the Shareholder's meeting
approves the proposal of settlement with Dr Ruggiero, the Company
will forgo being a civil party in the proceedings against him.
Updates on the initiatives to be taken against former directors, in
relation to the Kroll affair and relations with the consultant Naji
Nahas Consob has asked for an update on what was already presented
at the Shareholders' meeting on 15 May 2012. The Company has
acknowledged the information disseminated by the press with regard
to the legal position of the former Chairman of the Board of
Directors, Marco Tronchetti Provera. Before expressing an opinion
on possible initiatives to protect company interests, the Board of
Directors reserves the right to examine the order for closure of
the preliminary investigations. The analysis will be made within
the limits and in the time the Board has legitimate access to it,
in the forms allowed by the regulations. Only afterwards will it be
possible to make the decisions within its competence.
This document has been translated into English solely for the
convenience of the readers. In the event of a discrepancy, the
Italian language version prevails.
1
ATTACHMENT 3
With notice dated 15 October 2012, Consob invited the Board of
Auditors to report «their considerations regarding the possibility
that the developments in the criminal proceedings under way could
lead to the reopening of the terms within which a liability action
could be brought against former senior executives of the company».
The recent events in the proceedings of which we are informed
only by the press refer to the formal closure of the preliminary
investigations, which could prelude an application for indictment
of the former Chairman of the Board of Directors Marco Tronchetti
Provera for the offence of handling stolen goods (in the context of
the spying affair allegedly carried out by Telecom Italia Security
to the detriment of Kroll). The Board of Auditors, having
acknowledged this unofficial information, reserves the right to
carry out any necessary in-depth analysis and assessments regarding
this matter and any initiatives to protect the Company's interests,
when it will have full knowledge of the documentation of the
proceedings, within the limits provided for by the law. For the
time being, in response to Consob's requests, with reference to
both that stated above and the development of the criminal
proceedings under way, the Board of Auditors reserves however the
right to carry out every in-depth analysis and assessment regarding
the impact that the configuration of the acts as criminal offences
and their being qualified as specific criminal cases could have on
the viability of compensation proceedings, to be exercised on
various grounds, whether contractual or extracontractual, in the
interests of the Company, and this also with reference to the
applicable statute of limitations; all in any event excepting any
settlement.
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