July 12, 2013 / 1:06 PM / 5 years ago

Venice flood barrier executives arrested in massive fraud swoop

ROME (Reuters) - Police conducted dawn raids on Friday on companies across Italy linked to the construction of Venice’s flood barrier, arresting seven people suspected of rigging lucrative contracts for the multi-billion euro project.

Police are investigating whether the consortium that is managing the building work on behalf of the government fixed the bidding process in favor of local companies and paid off others with public funds to keep them quiet.

In the early hours, several hundred tax police conducted 140 raids on companies associated with the “Moses Project” all over Italy, placing seven people under house arrest and forbidding seven others from travelling.

The cost of building flood barriers to save Venice from sinking into the lagoon on which it is built doubled to 4.3 billion euro ($5.61 billion) a year after construction began in 2004. Building is now roughly 75 percent complete, according to a project website.

Police said they suspect a maritime construction company, Cooperativa San Martino, of using an Austrian front company to inflate the price of building materials bought from a Croatian firm, and creating slush funds with the extra money.

The companies involved did not immediately respond to requests for comment.

The project to protect the lagoon has been under discussion since 1966, when a high tide swamped the city, damaging many of its famous buildings. But the work has been delayed for decades, dogged by disagreements over its design, environmental impact and funding shortfalls.

Last year floods affected nearly three-quarters of the World Heritage site and tourists swam in St. Mark’s Square, the centerpoint of the city that attracts millions of visitors each year.

It was the fourth time since 2000 that Venice has been hit by record high tides, in an increase in frequency that the Italian government has blamed on climate change.

($1 = 0.7668 euros)

Reporting by Naomi O'Leary; Editing by Robin Pomeroy

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