WSJ.com - As Italy Votes, Golden Career Of Berlusconi Is at Crossroads March 30, 2006 DOW JONES REPRINTS This copy is for your personal, non-commercial use only. To order presentation-ready copies for distribution to your colleagues, clients or customers, use the Order Reprints tool at the bottom of any article or visit: www.djreprints.com. • See a sample reprint in PDF format. • Order a reprint of this article now. SILVIO'S WORLD • Read some of Berlusconi's countless colorful remarks.1 • Photo Slideshow: Silvio in the Spotlight2 • A look at the Berlusconi family holding company's investments. Silvio's World As Italy Votes, Golden Career Of Berlusconi Is at Crossroads Tycoon, Collector, Conqueror In Many Realms Struggles To Keep Public's Support 'I Sacrifice Myself for All' By GABRIEL KAHN March 30, 2006; Page A1 ROME -- When Italy's prime minister, Silvio Berlusconi, addressed a joint meeting of the U.S. Congress earlier this month, he recounted how he was inspired by a boyhood visit to the graves of American soldiers who had died in the fight to liberate Italy from fascist oppression. Minutes later, in an informal gathering with lawmakers, he hailed another American icon that guided him in his youth: Playboy. Mr. Berlusconi said he would rent out a copy, sent to him by an uncle, at 10-minute intervals to classmates at his Milan high school run by Salesian monks. "Of course," he said, "we were still good Catholics." From his start with the monks, Mr. Berlusconi went on to one of the most glorious records of success of any man in Europe. Time and again he has broken into fields that in Italy had been the domain of an established elite -- from construction to television, sports to politics. Along the way, he has amassed a fortune of close to $12 billion, almost twice that of Rupert Murdoch, mostly from his commercial television network, Mediaset SpA. He owns one of the most successful soccer teams in Europe, A.C. Milan, and he is the longest-serving prime minister in the history of the Italian republic. In his spare time, he has created a world-class collection of exotic flowers and cactuses, which he tends himself on his estate in Sardinia. "It's not a superiority complex; it's an objective fact," he said once during a news conference aboard a cruise ship he rented for an election campaign. "No one is as valuable as Berlusconi." Yet the man with the golden touch has proved a surprisingly leaden leader during his five years in power. Even on this sluggish continent, Italy is an underperformer. Growth last year was zero. Though nominally a free-market conservative, Mr. Berlusconi has done little to break monopolies, including those that keep Italians paying among the highest energy prices in Europe and impose steep fees for opening a business. His detractors say adroit manipulation of his media empire explains his political success. "He has represented a giant step backward for democracy," says former Italian Prime Minister Romano Prodi, who is running against Mr. Berlusconi in national elections on April 9-10. Critics say Mr. Berlusconi's legislative achievements are few because he has spent so much energy pushing laws to help himself avoid criminal charges from bribery to false bookkeeping. Mr. Berlusconi has said it is a "disgrace" for anyone to suggest that his government has passed laws to benefit him personally. He denies wrongdoing in the criminal cases against him. His office didn't respond to requests for an interview. Now, a few months short of his 70th birthday -- though he looks much younger after a face-lift and two hair transplants -- Mr. Berlusconi faces an uphill re-election battle. Polls say his coalition trails Mr. Prodi's by five percentage points. Mr. Berlusconi has been stumping throughout the country insisting that the economy is booming. Surely, he says, a nation that has more cellphones than people must be called prosperous. He also cites laws that made it easier to hire workers and overhauled the bloated pension system. But businessmen and shopkeepers, once his core constituency, have begun to tire of his ebullient promises. "Considering all he has been able to achieve in his life I had expected much more," says Lucia Lolli, who runs a small stationery store in Rome. "I'm profoundly disappointed." Should he lose, it may be the last great act in one of the most fascinating political careers ever seen in the land of the Medicis and Mussolini. Yet Mr. Berlusconi has often succeeded against seemingly unbeatable odds. In both business and politics, he has understood the market better than his adversaries. He has long ignored all boundaries, whether between business and politics, between the appropriate or inappropriate, or between personal and public. A pioneer of commercial television in Italy in the early 1980s, Mr. Berlusconi cultivated a close friendship with Socialist Prime Minister Bettino Craxi, whose government provided crucial support that allowed his television network to stay on the air. In 1994, when Italy's political order was collapsing under a bribery scandal, he used the money, men and means of his advertising company to create a new party, Forza Italia, or "Go Italy." Two months later, his coalition won parliamentary elections. Even his personal schedule knows few bounds. He often sleeps four hours a night and schedules appointments for 1 a.m., associates say. Most Saturdays, he travels to his villa in Sardinia, where a personal musician is frequently on hand to play the guitar as Mr. Berlusconi sings songs of his own composition. On Sundays, he flies to Milan to watch his soccer team play. On Mondays, he's back in Rome in his rented apartment in a 17th-century palazzo. One of Their Own Despite his glamorous lifestyle, many Italians still perceive him as one of their own, a regular guy. He is prone to gaffes, tells bawdy jokes in public and suggests it's acceptable to cheat on one's taxes, or one's wife. When he was asked in a recent radio interview whether he is faithful to his second wife, Veronica, Mr. Berlusconi answered: "I've frequently been faithful." In a speech two years ago to Italy's tax police, he said people shouldn't "feel guilty" about evading tax rates that were too high. On the campaign trail this week, he sparked a minor diplomatic incident when, trying to make a joke about the left-wing opposition, he said Communists in China would boil babies for fertilizer. "He's not a snob. He's on the same wavelength as the average Italian," says Fedele Confalonieri, Mr. Berlusconi's best friend from grade school, who is chairman of the Mediaset broadcaster and a confidant. "He's a bit of a braggart, though." On a recent television show, Mr. Berlusconi said "only Napoleon has done more" than he has as prime minister. Two days later, as newspapers poked fun at his hubris, he corrected himself: "I'm the Jesus Christ of politics, a victim, patient. I put up with everything. I sacrifice myself for all." Mr. Berlusconi dismisses the potential conflicts of interest that outrage his critics by noting that he has relinquished day-to-day control of his media empire to two of his children. The prime minister owns Mondadori SpA, Italy's largest book and magazine publisher. Mediaset is by far the dominant force in commercial television, controlling 63% of the advertising market. Mr. Berlusconi's brother, Paolo, controls one influential daily newspaper and his wife controls another. Since entering politics, Mr. Berlusconi has accumulated a long list of criminal indictments, any one of which might have forced a lesser man into retirement. The charges have included bribing tax police and judges, false accounting and illegal donations to political parties. On some he was acquitted or the statute of limitations expired before a trial was completed. On others, he was initially convicted and even sentenced to prison, but the convictions were overturned on appeal. Judges had to throw out charges against him alleging false accounting after Mr. Berlusconi's government pushed through a law decriminalizing the offense. Parliament also approved a law that granted the prime minister and other top state officials immunity from prosecution, even for crimes committed before taking office. The law was later deemed unconstitutional. Mr. Berlusconi has boldly turned his weaknesses into advantages. He claims to be the victim of communist prosecutors and a left-wing media conspiracy. Many in Italy believe him. These themes are echoed frequently in some of his magazines and on some of the news shows on his television network. On the campaign trail, he often stages show-stealing moments that turn the tables on his adversaries. Earlier this month, he arrived unexpectedly at the annual conference of Italy's powerful business lobby, strutted onto the stage and took the microphone to deliver a blistering attack on the nation's leading newspapers. "Don't believe the newspapers that speak of decline," he shouted, traversing the stage and pumping his fists. "Where is this crisis? It exists only on the left and in their newspapers." He boasts of building a strong alliance with the U.S. during the war on terror, in contrast to France and Germany. The Italian military has been a key component of allied forces in Afghanistan and Iraq. Winning Over Skeptics Mr. Berlusconi's charisma often wins over skeptics. Before meetings, he studies up on the personal details of someone he's scheduled to meet. He is generous with friends and allies. Last Christmas, he gave digital cameras to the 72 male senators in his Forza Italia party and bracelets to the five female senators. The 166 Forza Italia members of the lower house received hand-held computers. Emilio Fede, a former top anchor with state broadcaster RAI, joined one of Mr. Berlusconi's television stations in 1989 after a visit to the tycoon's 145-room estate in Arcore, just outside Milan. Mr. Berlusconi acquired the villa after its previous owner, a marquis, shot his wife and her lover before turning the gun on himself there in 1970. Mr. Berlusconi gave Mr. Fede and his wife a tour and sang them a song from the piano. They traveled by helicopter to Milan's soccer stadium to watch Mr. Berlusconi's A.C. Milan beat A.S. Roma. Later, in his office, Mr. Berlusconi slipped Mr. Fede a piece of paper with a handwritten salary figure. Mr. Fede accepted and has been one of the prime minister's most loyal fans ever since, earning him the nickname "Fido" in the media. On his office wall are pictures of himself with Mr. Berlusconi. Mr. Fede points to one: "In this one, we're dressed alike." Mr. Berlusconi sums up his own life story in "Una Storia Italiana," a 129-page photo-filled booklet sent to every voter before the last elections in 2001. There, he describes himself as a typical Italian born to a family of modest means in Milan before World War II. But he says he had big dreams and the good fortune to have been born under a lucky star. The book includes his horoscope. His talents emerged at an early age, he says. In high school, he would always finish his work first, then help his classmates -- for a fee, according to the book. He earned extra money during university by singing and playing guitar in bands and on cruise ships with Mr. Confalonieri, who accompanied him on piano. In 1961, during university, Mr. Berlusconi forged another lasting friendship. Though he usually sold copies of his lecture notes, he lent a copy free to fellow student Marcello Dell'Utri, who had come to Milan from Sicily, Mr. Dell'Utri recalls. For many years, Mr. Dell'Utri served his friend as chief executive of Publitalia 80, the advertising arm of Mediaset, and later became a senator in the Forza Italia party. In December 2004 he was convicted of having contacts with elements of the Mafia. Prosecutors accused him of acting as a go-between in alleged dealings between Sicilian organized crime and Mr. Berlusconi's business empire. Mr. Dell'Utri has also been convicted of tax fraud stemming from his role as an executive in Mr. Berlusconi's companies. He has appealed the conviction on Mafia association and calls the accusations politically motivated. In 2004, Mr. Berlusconi appointed Mr. Dell'Utri to the Council of Europe, an international body, based in Strasbourg, France, that promotes peace and democracy. The post gives Mr. Dell'Utri protection from arrest and from serving prison time. Mr. Dell'Utri describes his friend as "a person who does not have limits." One day, 40 years ago, Mr. Berlusconi took Mr. Dell'Utri to a foggy field outside Milan. "I'm going to build a city here," he recalls Mr. Berlusconi saying. "You're crazy," answered Mr. Dell'Utri. That field became the site of Milano 2, a revolutionary housing project in Italy that replicated an American suburb. The Milanese middle class snapped up the apartments, which were built around a duck pond, restaurants and boutiques. Shortly after the Milano 2 project, Mr. Berlusconi sensed that television could be his next big moneymaker. In the 1970s, Italian television was dominated by the stodgy state broadcaster, RAI, which didn't start broadcasting until the afternoon, kept tight limits on how many commercials aired and handpicked which companies could advertise. Mr. Berlusconi believed there was a fortune to be made if he could find a way break RAI's monopoly. He devised a clever strategy to sidestep a law that blocked the creation of private national TV networks. He bought up local broadcast rights around the country, and then had all his local stations broadcast the same program at the same time. This allowed advertisers that had been shut out of RAI to reach a nationwide audience. Mr. Berlusconi's programming was geared toward the masses, with soap operas for stay-at-home mothers and cartoons for children. But in 1984, judges in Turin and Rome, calling the national network illegal, ordered Mr. Berlusconi's network to broadcast only local content. Mr. Berlusconi responded by pulling all his programming off the air in those cities in protest. 'Revolt of the Smurfs' That sparked what came to be called the "Revolt of the Smurfs," named after the cartoon show broadcast on his network. Many children complained to their parents when the station suddenly went dark. Angry families demanded that the broadcasts be resumed. Mr. Berlusconi appealed to the prime minister, Mr. Craxi. The leader, who would later serve as best man at Mr. Berlusconi's wedding to his second wife, signed a government decree that allowed the stations back on the air. Mr. Berlusconi's network soon stole audience share from RAI, while dominating its nascent private competitors. One struggling rival private station, Rete 4, tried to gain an audience by spending heavily on the rights for the miniseries "Winds of War," starring Robert Mitchum. For much less money, Mr. Berlusconi's station aired "The Thorn Birds," a miniseries in which Richard Chamberlain plays a priest who frolics with a young woman. "The Thorn Birds" destroyed "Winds of War" in the ratings, almost driving Rete 4 out of business until Mr. Berlusconi bought it. As a businessman, say associates, Mr. Berlusconi could obsess over the look of a new show, while paying little attention to the financial details of his business empire. "I could never get him to look at more than a page of figures," says Franco Tatò, who has served as chief executive of Fininvest, Mr. Berlusconi's holding company. "But he can follow the rollout of a new product in minute detail." During the Gulf War in 1991, Mr. Berlusconi called up Mr. Fede, the anchorman, at 5 a.m. one day. He complained that the marker used on the previous evening's newscast to highlight newspaper headlines was the wrong color. "He told me, 'Don't use a yellow highlighter, use a green one,' " Mr. Fede says. Though Mr. Berlusconi's television venture was popular with viewers, it ran up debt equivalent to more than $2.4 billion by 1993. The entire business empire was at risk, recalls Mr. Tatò. He says he tried to warn his boss about the risk of banks closing their credit lines, to no avail. "Having so much debt is a good thing. It means that the banks trust me," retorted Mr. Berlusconi, according to Mr. Tatò, adding, "Besides, I'm lucky." Around the same time, Italy's political order was collapsing under a bribery scandal in which Mr. Berlusconi would later be implicated. Mr. Craxi became one of the chief targets and later fled to Tunisia to avoid prosecution. Mr. Berlusconi had relied heavily on Mr. Craxi's support to keep his television network running smoothly and feared repercussions if a left-wing coalition dominated by Italy's former communist party took power. In late 1993 and early 1994, Mr. Berlusconi summoned top executives and editors from his television stations and print publications to his Milan estate to discuss strategy. His idea: create a new political party with himself at the helm. "It seemed absurd to us," says Federico Orlando, who was deputy editor of the Milan daily Il Giornale, which Mr. Berlusconi owned at the time. But Mr. Berlusconi's understanding of the market proved to be spot-on. "The voters were exactly as he understood them to be, not as we thought they were," Mr. Orlando says. Mr. Berlusconi came up with the name Forza Italia, after the popular soccer chant, "Go Italy." He wrote the lyrics to the party anthem, say several colleagues. He also designed an intensive training course for prospective Forza Italia candidates, many of whom were sales executives in Publitalia. Known as "the kit," it included a necktie, videos and a manual with advice on politics and grooming. Just as the bribery scandal had decimated Italy's traditional governing parties, Mr. Berlusconi set out to create a new movement that appealed to a consumer-savvy middle class. "It was as if all the products on the shelf that people had used for years suddenly disappeared," says Mr. Dell'Utri, his old friend. "He invented the political equivalent of the formula for Coca-Cola." On Jan. 26, 1994, in an address from his Milan estate broadcast on his television stations, Mr. Berlusconi announced his candidacy, promising "a new Italian miracle." He was voted into office two months later. Fading Fortune His good fortune didn't last long. In November, while presiding over a conference on international crime in Naples, Mr. Berlusconi received his first formal notice from prosecutors that he was under criminal investigation for alleged corruption. One of the parties in his governing alliance jumped ship, and his government collapsed after only seven months in office. Many assumed that Mr. Berlusconi, who had promised to bring a new, clean type of politics to scandal-tarred Italy, was finished. But they underestimated his resilience. "He's an incredible fighter. He's the only politician capable of completely reversing his fortunes with one grand coup de théâtre," says Stefano Folli, a political commentator for the business daily Il Sole/24 Ore. Indictments against Mr. Berlusconi continued to roll in during the 1990s, but each time he would describe it as fresh evidence that he was the victim of a political witch hunt. His battle against prosecutors became a central plank of his campaign in 2001 parliamentary elections, along with lowering taxes and creating new jobs. He won convincingly and once again became prime minister. To date, Mr. Berlusconi has been the target of more than 90 investigations and he has been indicted more than 10 times. This month, prosecutors asked that he be indicted for allegedly bribing a British lawyer, David Mills, to make favorable testimony in a case. Mr. Berlusconi said the timing of the prosecutors' request, on the eve of elections, was further proof that they were out to get him. At his annual year-end news conference in December, Mr. Berlusconi summed up his last term. "I'm convinced that no one in the history of the republic has ever done what we did," he said, "and that no one could have done better." Write to Gabriel Kahn at gabriel.kahn@wsj.com3 ALL IN THE FAMILY Silvio Berlusconi owns 66% of Fininvest, the Berlusconi family holding company, and his children split the rest. The company, valued at slightly less than 10 billion euros, has wide-ranging investments. Among the holdings: Company Business Fininvest owns Mediaset Television and telecommunications 35% Mondadori Publishing 50% Medusa Cinema 100% Pagine Italia Information directories 45% A.C. Milan European football club 100% Mediolanum Financial services 35% Teatro Manzoni Historic theater 100% Source: Fininvest URL for this article: http://online.wsj.com/article/SB114368071781111793.html Hyperlinks in this Article: (1) http://online.wsj.com/article/SB114365470385511349.html (2) javascript:window.open('http://online.wsj.com/documents/info-silvio0603.html','silvio0603','toolbar=no,scrollbars=no,location=no,width=750,height=623,left=20,top=0');void(''); (3) mailto:gabriel.kahn@wsj.com Copyright 2006 Dow Jones & Company, Inc. 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