In 1978 the Oxford-educated barrister David Mills retrained as a solicitor and quickly became an expert in offshore tax-avoidance schemes. As well as establishing his own firm, Mackenzie Mills, he worked for Carnelutti, a leading Italian law firm. By 1992 he had 50 clients, including Benetton, the clothing manufacturer, and Fininvest, which is at the heart of the Berlusconi empire.

What did Mr Mills do for Signor Berlusconi?

In March 1980 he set up Reteitalia, whose principal activity was the purchase and sale of film rights for Signor Berlusconi’s television stations. Over the next 15 years Mr Mills set up a number of other companies for Fininvest.

Why did Mr Mills’s dealings with Signor Berlusconi come under the spotlight?

When Signor Berlusconi stood for Prime Minister of Italy for the first time in 1994, his complex business interests came under greater scrutiny. Investigators were particularly interested in the international network of trusts and offshore companies set up for Fininvest by Mr Mills.

What did investigators find?

A report by KPMG, the accountancy company, found that 3.5 trillion lire (about £1.2 billion at the time) passed through 64 Fininvest companies between 1989 and 1996. The proceeds went through accounts in Switzerland, Monaco and the Bahamas belonging to Berlusconi associates. The Italian authorities allege that this was done to avoid paying taxes in Italy and generate profits that could be kept off the books. Mr Mills and Signor Berlusconi are facing a trial for tax evasion.

Why did Mr Mills personally come under scrutiny?

In 1997 and 1998 Signor Berlusconi went on trial for corruption. In the first trial he was convicted of bribing tax officials to obtain favourable audits for Fininvest companies. In the second he was convicted of paying Bettino Craxi, the former Prime Minister, through another company. He was later acquitted in both cases. Mr Mills was called as a prosecution witness in both cases. It is alleged that Mr Mills failed to declare what he knew about the ownership of the network he had set up; namely, that its beneficiaries were associates of Signor Berlusconi. “It’s not up to me to say who is the owner and who isn’t,” Mr Mills told the court.

What happened next?

In 1999 Mr Mills received £350,000 from an account in the Bahamas. The money went through at least seven accounts before ending up in an offshore hedge fund called Torrey. Italian prosecutors say that this was a “reward” to Mr Mills for keeping quiet in court. Mr Mills says the money does not come from Signor Berlusconi, and insists it is not a bribe.

How did the prosecutors find out about this?

Mr Mills wrote a letter to his accountant in February 2004, which prosecutors say is evidence of a confession. The letter revealed that Mr Mills was concerned that the Inland Revenue might take an interest in a sum of £350,000 which, according to the letter, he had indirectly received from the “B organisation”. Bob Drennan took this to mean Signor Berlusconi. Mr Mills first told investigators that the money came from Carlo Berlusconi, a senior executive of Fininvest who died in 2001, but now says that it came from an unrelated source.

How is Tessa Jowell involved?

Last week Mr Mills claimed that his wife had no financial role in the matters. But The Sunday Times has disclosed that Mr Mills and his wife re-mortgaged their house in September 2000 for £408,000 and used the money to invest in a hedge fund, Centurion. However, the mortgage was repaid the next month after the sale of the Torrey units. Ms Jowell’s signature is on the mortgage papers. She said that Mr Mills dealt with matters such as the mortgage. “I was perfectly happy in the division of our finances to sign the charge,” she said yesterday.

Are these charges politically motivated?

Both Signor Berlusconi and Mr Mills claim that the prosecutors are politically motivated. The whole judicial process is politicised in Italy. Judges and prosecutors are political appointees and the prosecution is taking place weeks before a general election.

What questions remain?

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