Mr Mills & the Mob

David Mills had a spring in his step when he left the London home he shared with his wife Tessa Jowell and headed for Milan to pay a visit to Italian investigators in July 2004.

"I thought I'd go down to see them and give them all they want and I'll come away smelling of roses," he told The Independent on Sunday two weeks ago.

Today, the corporate lawyer knows that the aroma hanging over his business affairs is not that of flowers. Each day drags another unsavoury detail from the thicket of hedge funds, offshore accounts and multiple mortgage applications that surrounds him.

Mr Mills is thought this weekend to be holed up with his legal team trying to force a delay to a hearing on Tuesday at which the Milanese magistrates he visited two years ago want to have him indicted for corruption.

At the centre of the case is the now notorious £344,000 that eventually ended up in the Jowell domestic finances after a three-year journey around the world's tax havens.

He has retracted a confession that the money was a bribe by Silvio Berlusconi sent via their mutual friend and associate Carlo Bernasconi. Instead, he has provided prosecutors with evidence showing the money originated from a fund, the Hadrian Trust, set up by Mr Mills, the beneficiary of which is Diego Attanasio, a businessman with no known links to Mr Berlusconi.

It was to protect this client, Mr Mills said, that he made up his "idiotic" story about the bribe in a letter to his accountants, which they passed to the police. Asked who had given him the money, he said: "I'll tell you. His name is ... I mean it's in the court papers, and his name is Attanasio."

But Mr Attanasio denies making the payment and prosecutors have been unable to get hold of a payment order that would settle the question of who deposited the funds in the account in 1997. Until such documentation is found, it remains possible, they say, that it came from the Berlusconi camp.

Yesterday, in a statement from his lawyer, Mr Mills again denied taking a bribe from the Italian Prime Minister but intriguingly failed to say directly that it had come from Mr Attanasio. Instead, it was said to have been paid "from funds held for" his client.

The second problem for Mr Mills is that the dealings of Mr Attanasio are scarcely more respectable than those alleged by the Italian prosecutors. Mr Attanasio, a Neopolitan shipbuilder, met Mr Mills in Rome in the early 1990s when the Italian was trying to set up a leisure boat business on the Tiber. The two became friends and it seems Mr Mills started acting for the Italian. He is named as the administrator of an Isle of Man registered firm, Dendor, involved with Mr Attanasio in a land deal in Salerno, southern Italy, for which the magnate was eventually jailed for bribing a planning official.

When Italian magistrates sought to interview Mr Mills about his part in the deal, they found him less than forthcoming. Filippio Spezia, the investigator, said: "Mills said in the Dendor case he was representing the interests of another Naples man, but he would not say who."

This man's identity is of intense interest to those seeking to make a connection between Mr Attanasio and Mr Berlusconi. Sadly for them, the British Home Office displayed little inclination to lean on Mr Mills to be more co-operative, Italian magistrates complain. Nor did the British authorities bend over backwards to investigate a known Sicilian link between Mr Mills, Mr Berlusconi and the politician and businessman Marcello dell'Utri.

Here, Mr Mills's Italian connections really do raise eyebrows. In 1985, Mr Mills appointed Mr dell'Utri as director of a firm he had set up in London. Mr dell'Utri was said by Sicilian judges last year to have made "a concrete, voluntary, conscious and specific contribution to the illicit goals of Cosa Nostra, both economically and politically".

Mr Mills says he has never met Mr dell'Utri, but it is impossible that he has not known of his reputation for many years. Last year, Mr dell'Utri was given a nine-year sentence in Palermo for colluding with the Mafia. He is appealing the verdict.

He is one of Mr Berlusconi's oldest friends and was his junior at college in Milan. A lawyer by training, Mr dell'Utri was alleged to have first come into contact with the Mafia when he and a Mafioso were involved in running schoolboy football teams in Palermo.

In the mid-Seventies, Mr Berlusconi bought the immense villa outside Milan that is still his main home, Villa Arcore, and Mr dell'Utri lived there for a time. Mr dell'Utri brought a young Mafia boss, Vittorio Mangano, to stay in the villa, ostensibly working in the stables, though as Mr Berlusconi only possessed one horse it was hardly a full-time job. When he came to Villa Arcore, Mr Mangano already had a lengthy criminal record. A top Sicilian prosecutor, Paolo Borsellino, said shortly before he was assassinated that Mangano was "one of those personalities who acted as a bridgehead for the Mafia organisation in northern Italy".

In 1982, Mr dell'Utri took over the running of Publitalia, Mr Berlusconi's advertising company, which revolutionised TV advertising in Italy. By cutting out conventional advertising agencies, the company saw its turnover soar in the Eighties. It was in the middle of that decade that Mr Mills set up the British arm of the firm, Publitalia International Ltd, appointing Mr dell'Utri as its director. At the time, the prosecution at Mr dell'Utri's trial in Palermo said that Mr Berlusconi's main company, Fininvest, was paying a "friendly" annual donation to the Mafia.

Mr dell'Utri is also the founder of Forza Italia, Mr Berlusconi's political party. During the trial, the prosecution claimed that Mr dell'Utri was useful to Mr Berlusconi because he already had connections to the Mafia in Sicily.

The Milanese magistrates investigating Mr Mills were reported last week to be looking afresh at Publitalia and Mr dell'Utri, and to be angered at what they see as Home Office attempts to "balk" their investigations.

The Serious Fraud Office was prevailed on to help the Milanese authorities in searching for the source of the £344,000. It raided Mr Mills's home and office. This was carried out with as much discretion as could be managed, with officers visiting the couple's London home on 10 February while Ms Jowell was abroad. They failed to find the original payment order showing who had deposited the cash in the Hadrian Trust in 1997.

Questions are being asked as to why Mr Mills has not been investigated in Britain. He has, after all, brought large sums of money into the country in complex transactions from sources connected to a convicted criminal. David Raynes, an anti-corruption strategy adviser, said the evidence warranted a UK inquiry.

He said: "It is quite easy to see these matters will need to be investigated. This is a UK citizen bringing £350,000 into the UK via a network of offshore trusts, who has not yet proved without doubt the money was honestly earned. This is the type of activity the Proceeds of Crime Act 2002 was designed to deal with."

An expert on money laundering, John Christensen, director of Tax Justice Network said: "I think that there are grounds to ... investigate Mr Mills ... There appears to be sufficient evidence to investigate under the provisions of the Proceeds of Crime Act 2002."

Whatever happens in the coming weeks, it seems unlikely that Mr Mills will realise his hope of regaining a rose-perfumed reputation.

The £344,000 saga in 344 words

This notorious sum arrived in Tessa Jowell's domestic finances by way of a repayment of a joint mortgage on the London home she shares with her husband David Mills in November 2000.

Italian prosecutors allege that it was a gift from Silvio Berlusconi for favourable evidence given by the lawyer in court. Mills insists it was paid for "proper reasons and in good faith" from funds held by another client.

Ms Jowell escaped with her political career intact this week when she claimed that she had had no knowledge of the payment, whatever its source, until August 2004.

Had she known about the money, and failed to declare the sum to her civil servants, she would have broken the ministerial code and would almost certainly have had to resign.

This is because her husband claimed that it was a gift and, under the code, ministers are obliged to declare gifts that could lead to a conflict of interest. By the time she knew about the sum, it had been classified by the Inland Revenue as taxable and was, according to Tony Blair's interpretation of the rules, not a gift.

Her so-called "ignorance defence" has been undermined, however, by the fact that she signed a second mortgage application in 2002 without, apparently, knowing that the first had been paid off. If she did not know about the disputed sum, claim critics, the Secretary of State must have thought that she owed more than the house's value.

Yesterday, Mr Mills sought to deflect "misinformed comment" about transactions on the couple's home. In a statement issued through his lawyer, he said the key home loan had been raised temporarily as surety for a bank against a personal investment by him alone.

His words are presumably designed to reduce pressure for a Commons investigation into why she did not declare in the Register of Members' Interests the investment - funded by the home loan - in the high-value Centurion hedge fund. His statement also rebuts claims the mortgage may have been used as a device to help launder the disputed money.

Marie Woolf

THE STATEMENT

Issued by David Kirk, solicitor to David Mills

I am David Mills's solicitor, and am making this statement on his behalf.

First, while the temptation for some to try the Italian case themselves day by day must be irresistible, the fact is that a proper legal process is under way in Italy, which will take some months to conclude. My client is confident about the outcome of these proceedings.

Secondly, my client wishes to state categorically that he has never been bribed by Mr Berlusconi or by anyone on his behalf. He very much regrets that, through a bizarre series of events for which he must take his share of responsibility, that accusation has been made against Mr Berlusconi. Mr Mills knows that the documents will prove this.

He further states that the money which is alleged to be a bribe from Mr Berlusconi was paid to Mr Mills for proper reasons and in good faith from funds held for his client, Diego Attanasio, and that the relevant documents in the case unambiguously corroborate the truth of his account.

Mr Mills has paid all taxes due on all amounts received by him from Mr Attanasio, including on the amount which he considered to be a gift, which has been taxed as income in his hands.

My client accepted the Revenue's view that the absence of a written deed of gift rendered the payment taxable, whatever the circumstances, or identity of the donor and informed them who had in fact paid the money to him.

There has been a good deal of misinformed comment about the mortgage taken out by my client and his wife in September 2000, which was paid off shortly after.

Although the document was, in law, a mortgage or charge over their jointly owned house, it was in effect simply a way of guaranteeing the bank, which had lent money to Mr Mills personally, against a fall in the value of the investments he was buying.

It was a short-term loan secured in the first place on the value of the securities bought and was in fact paid off after a short time. At that time there was no mortgage, in the usual sense, on their house in London.

Apart from what I am saying now, neither I nor Mr Mills will be making any comment on any material in this case which may make its way into the press.

It must be clear to all that the Italian prosecutors are feeding information to the press about my client with the intention of trying the case in the media rather than by due process, and making life so impossible for him that he will seek to bring the proceedings there to a quick end by making an admission. He insists that he will not do so, as he is innocent.

This whole business has imposed a dreadful strain on my client and his marriage. He fully accepts responsibility for these pressures and for the situation into which he put his wife, whom he knows is entirely blameless in all of this. He is as mortified as she has been angered by the embarrassment he has caused her.

They hope that over time their relationship can be restored, but, given the current circumstances they have agreed to a period of separation. They ask that the privacy of their children be fully respected.

THE ITALIANS

SILVIO BERLUSCONI

The Italian premier and media mogul alleged to have rewarded Mr Mills for "turning some tricky corners" in a previous trial.

CARLO BERNASCONI

Now dead. Executive and close friend of Mr Mills, who claimed Mr Bernasconi had made the disputed payment.

DIEGO ATTANASIO

The Naples shipbuilder who Mr Mills first claimed had given him the money. But Mr Attansio denies it, saying he was in prison at the time for corruption.

MARCELLO DELL'UTRI

The Sicilian politician and businessman convicted for his Mafia links whom Mr Mills appointed to a Berlusconi-run firm in London in the 1980s.

THE FAMILY

JOHN MILLS

His brother and millionaire boss of import business. Labour councillor in Camden for 30 years, turning round council's derelict finances.

DAME BARBARA MILLS

His barrister sister-in-law, director of public prosecutions until 1998 during a difficult time for the Crown Prosecution Service.

KENNETH MILLS

His father, who was a British spy first in Gibraltar then in Jamaica, where family legend has it that he was instrumental in foiling Fidel Castro's first coup in Cuba.

ELEANOR MILLS

His daughter, editor of The Sunday Times News Review. Colleagues gave her a fake list of planned articles to conceal investigations of her father in last week's issue.