Saturday, November 22, 2008

Recession Leads to Boom Time for Mob Loan Sharks

The worldwide economic downturn has opened the door for loan sharks to burrow ever deeper into Italy's vulnerable economy by preying on businesses that need quick cash and credit, according to a new report by a respected trade group.

Confesercenti, a business association that has tracked Mafia income for the past 15 years, found that the credit crunch has a particularly sinister side in a country of 58 million people that struggles with four large Mafia gangs -- the Cosa Nostra, 'Ndrangheta, Camorra and Sacra Corona Unita -- and other criminal enterprises.

In the past year, 180,000 firms in an economy dominated by small businesses apparently have succumbed to loan sharks, in part because they no longer can qualify for bank loans, according to a report released last week in Milan. "Shop owners are really falling into the trap," said Marco Venturi, head of the association that produced "Crime's Hold on Business."

"This is dangerous. Once you get into loan sharking, you can never really free yourself," Venturi said. "The rates are always increasing. It is debt adding upon debt."

Rome is the nation's biggest loan shark market, Venturi said, and cooperation with criminality is part of the unfortunate times. Italy—like the other 14 European countries that use the euro — has officially fallen into recession, and criminal gangs are poised to take full advantage.

Criminal groups account for about 6 percent of Italy's gross domestic product. The loan-shark business generates an estimated $60 million a year for all criminal enterprises. Major Mafia gangs reap about $15 million from the high-risk credit deals—but they also are "actively" trying to expand that role by seeking more borrowers, Venturi added.

Venturi said researchers found that some strapped-for-cash business owners promise to pay out as much as 500 percent interest to secure a loan. The minimum interest demanded by organized crime is about 30 percent, he said.

One of the most common Mafia demands on small businesses is for protection money—known as pizzo—which pulls in about $8 billion annually, the report said. But increasingly, organized crime is trying to squeeze financial cuts from tourism, the health-care industry, meat and food producers and any kind of business-related service, including a mobile phone provider.

The economic downturn is a loan shark's dream, Venturi said. Small-business owners see their livelihoods at great risk because of the financial crisis and are willing to do anything to avoid losing the family business, he said.

"The reality is Italy depends on its small businesses for vitality," Venturi said. "Now they are falling into the grip of criminals."

Thanks to Christine Spolar

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