7:45 AM -- Italian operators Telecom Italia (TIM) and FastWeb, which is owned by Swisscom AG (NYSE: SCM), knew about the $2.7 billion money-laundering scam that's now the focus of a fraud probe, according to the allegations of a witness, reports Reuters.

The scandal involves Telecom Italia Sparkle , the incumbent's wholesale division, and FastWeb, which are alleged to have cooked the books with phantom purchase orders in order to claim back taxes. The operators say they are the victims of a fraud perpetrated by rogue individuals. (See Swisscom Responds to Italian Allegations and T Italia Updates on Probe.)

The scandal has already resulted in the arrest of FastWeb's founder and former CEO, Silvio Scaglia, and is generating some interesting viewing for the legal fraternity and Italian media, notes The Financial Times.

— Ray Le Maistre, International Managing Editor, Light Reading