Italian Parliament wants to help to Lottomatica, Snai

Implications: The prosecutors are claiming damages for a total of €98bn from the Italian gaming concessionary companies, including €4.0bn from Lottomatica (LTO.MI) and €4.8bn from Snai (SNA.MI). While the government is still considering what to do, there's increasing pressure from the Parliament to approve a bill which may help the industry to pay much smaller amounts.

Analysis: The prosecutors at Rome-based "Corte dei Conti" issued fines against 10 gaming concessionary companies for a total of €98bn, for the lack of compliance with the 2004 regulations on the online transmission of information between the installed gaming machines and the Ministry of Finance (through its agency Sogei). Two listed companies received very high fines, Lottomatica (LTO.MI) for €4.0bn and Snai (SNA.MI) for €4.8bn.

The problem is mainly political. The Deputy Minister of Finance, Alfiero Grandi, chaired a special committee since June 2006 to check the possible responsibilities inside the government for lack of surveillance over the gaming industry, since the gaming activity is possible in Italy only based on a concession agreement with the government.

Now the prosecutors are checking whether some people inside the Ministry of Finance and its division AAMS may have been corrupted by the concessionary companies for not doing their surveillance job. This probe may even lead to the arrest of some high-profile officers of the Ministry. If such an event will happen, it will become a major political scandal.

The current problem however is the gigantic fine, calculated by the "Corte dei Conti" prosecutors based on the concession agreement - which is not a public document, despite the concessionary companies have the right to make it public. The concessionaries are contesting the prosecutors' calculation, saying that the result should be very different. It's hard to tell who is right, since it's impossible to proceed with a legal analysis without having access to the text. However the administrative court of Rome ruled in favor of the suspension of the payment of the fines until the end of the trial.

Such a gigantic fine would kill the whole gaming industry. Therefore the Parliament is trying to find a solution. The House Finance committee approved a resolution in August 2007 suggesting the re-consideration of the current concession agreement rules leading to those fines. Some MPs suggested to approve a bill in order to shorten the period for the application of the new regulations for the gaming machines, pushing the beginning of the application from 2004 to 2006. That would result in a major cut to the concessionaries' fines, which are calculated on the basis of days in lack of compliance.

Finance minister Vincenzo Visco denied that his ministry is studying such a bill. However it's possible that other cabinet members are considering such an idea. On Friday, September 28 the government will submit its Budget bill for 2008. Between October and December it will be up to the Parliament to modify and approve such a bill. It's entirely possible that the gaming industry's lobbying effort will be successful, resulting in the approval of an "earmark" inside the Budget bill in order to cut dramatically their fines.