Italian Healthcare Fund Linked to a Massive Mafia Organization

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Members of the Italian mafia organization, Ndrangheta, enter the court in January 2021, after prosecutors indicted nearly 400 members of the organized crime syndicate for murder, drug smuggling, etc. Due to the scale of the trial, the Italian court of law had to lease and convert a call center into a temporary courtroom. AFP Yonhap News

The Italian Healthcare Fund (Italian Fund), in which over 110 billion won has been frozen since authorities suspended the repurchase of the fund, invested in a fund managed by a huge Italian mafia organization. Investigators discovered that Shin, a former employee of Hana Bank who led the design and sales of the Italian Fund, visited Italy while the fund was being sold. Prosecutors have identified Shin as the key figure in the Italian Fund fraud.

Hana Bank sold 150 billion won worth of the Italian Fund, which is a fund of funds (FOF), a fund that invested in an overseas fund that in turn purchased trade receivables for medical expenses that Italian hospitals were to receive from the Italian government. Overseas funds invested in Italian hospitals through Italian special purpose vehicles (SPV). An SPV that directly invested in Italian hospitals acted as an intermediary between overseas funds and hospitals. The Italian Fund that Hana Bank sold also made investments through an SPV.

According to the Kyunghyang Shinmun coverage on November 29, some of the money from the Italian Fund sold by Hana Bank was used to purchase the bonds of a special purpose vehicle called Chiron. According to a due diligence report by Samil PWC Accountings requested by Hana Bank after financial authorities suspended the repurchase of the Italian Fund at the end of 2019, the fund purchased bonds from Astrea and Project 1705.

Chiron is an SPV that is actually run by Ndrangheta, a massive Italian mafia organization. Ndrangheta, which mainly operates in Calabria in southern Italy, owns the local hospitals and funeral parlors in this region, and through the SPV, it traded medical receivables that they would receive from the Italian government. Chiron was established in 2017 and purchased medical receivables worth 50 million euros. The Guardia di Finanza arrested 28 members of Ndrangheta in connection with this case at the end of 2018 and have reportedly prosecuted most of them. Nearly 400 members of Ndrangheta have been prosecuted on charges of murder, drug smuggling, and illegal loansharking and have been on trial since January this year.

Financial Investigation Division 2 (chief prosecutor Kim Rak-hyeon) at the Seoul Southern District Prosecutors’ Office investigating the Italian Fund fraud is eyeing the movements of Shin, the former Hana Bank employee who oversaw the design and sales of the fund. Shin went to Italy on business in November 2018. That was when the Italian financial police were investigating Ndrangheta, so Shin is likely to have known that the Italian Fund had invested in bad assets. However, Shin sent an e-mail to all private bankers in May 2019 asking them to aggressively sell the Italian Fund, since the fund’s maturity could be reduced to thirteen months from the initial 24 or more months. The bank had sold only 30 billion won worth of the Italian Fund in 2017-2018, but after Shin’s request, sales shot up to over 150 billion won.