Italian law firm did not warn British investors of mafia allegations

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Aug 02, 2017
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The Court of Appeal was told that one property development was seized by Italian financial police investigating an alleged £400 million money-laundering operation

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An Italian law firm has been ordered to compensate several hundred British investors for failing to tell them that a property scheme was alleged to be a money laundering vehicle for the mafia and the IRA.

In what is being billed as the first case of its kind involving a law firm, Court of Appeal judges ruled that Giambrone – which has offices in Rome, Milan and Tunis as well as in London and New York – is liable for the full consequences of its failure properly to advise about the potential risks of investing in an Italian resort development. 

The court, which handed down judgment earlier this week, was told that the Italian firm had been approached by developers of two property projects in Calabria to act on behalf of prospective purchasers. Neither development – the Jewel of the Sea and El Caribe – was completed within the timescale set out in the contract. And the Jewel of the Sea has since been seized by the Italian financial police in connection with allegations of a £400 million money-laundering operation organised by the mafia and the IRA.

The court also heard that Gabrielle Giambrone, the Italian law firm’s senior partner, was sanctioned and struck off as a registered European lawyer by the Solicitors Regulation Authority in 2013 in connection with the claims.

Lawyers for the potential investors say they act for about 180 British buyers who had been enticed by the prospect of purchasing luxury apartments in an exclusive part of Italy. They paid deposits ranging between £30,000 and £105,000 for off-plan deals. Those investors are now attempting to recover the amounts lost in the failed transactions. 

Initially, the High Court in London ruled that the preliminary contract was inadequate to protect the interests of the purchasers. It also found that they had not been given enough relevant information, particularly in relation to the payment structure of the project and the level of commission going to the promoter.

The law firm appealed, but the Court of Appeal decided that Giambrone was liable. Three appeal judges – Lord Justice Jackson, Lord Justice Underhill and Lord Justice Moylan – said that “there are allegations that the whole project was a money laundering operation organised by the IRA and the Italian Mafia, in order to recycle the proceeds of IRA criminal activities”.

Two London law firms – Penningtons Manches and Edwin Coe – acted for the British investors. “We are delighted with this decision,” David Niven, a partner at Penningtons Manches said. “Our clients have been battling to recover substantial sums for nearly ten years.”

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