Italian carmaker De Tomaso chairman arrested

TURIN (Reuters) - The chairman of carmaker De Tomaso, Gian Mario Rossignolo, and two other men were arrested in a probe to determine whether they may have misused 7.5 million euros ($9.2 million) of public funds in a failed turnaround plan, Italy’s tax police said on Thursday.

The botched De Tomaso turnaround aimed to use a former Pininfarina PNNI.MI factory on the outskirts of Turin to produce SUVs and sports cars. Its collapse leaves about 1,000 workers unemployed, and points to the difficulties local authorities face in reconverting shuttered car factories as automakers take measures to cope with years of losses.

Peugeot PEUP.PA announced on Thursday it is firing 8,000 workers and shuttering a plant outside Paris in 2014.

Rossignolo’s and the carmaker’s lawyers were not immediately available for comment. De Tomaso filed for bankruptcy earlier this year after Rossignolo’s plans to re-launch the maker of the Pantera sports car collapsed because he failed to find financial backing.

The Turin prosecutors office opened a probe a few months ago asking the tax police to ascertain how De Tomaso was making use of public funds.

Police said in a statement that investigators believe the managers may have used a false bank guarantee to receive funds from the region of Piedmont and from the European Union, and that some of the money may have ended up in the three men’s bank accounts.

De Tomaso received several million euros in public funds for re-training of 1,000 workers starting in January. The workers have been on temporary layoff since 2010.

In May, the Piedmont region asked the company to refund 5 million euros it had granted to the carmaker.

Now under house arrest, Rossignolo is a former Fiat executive best known for a short and turbulent stint as chairman of Telecom Italia SpA (TITL.MI) in 1998. Also arrested were the head of De Tomaso’s human resources office, and a financial intermediary. ($1 = 0.8164 euros)

Reporting by Elisa Sola and Ilaria Polleschi; Writing by Jennifer Clark; Editing by Erica Billingham