The chief executive of Swisscom AG said Fastweb was a victim of fraud, a Swiss paper reported on Saturday, the second time the CEO has come out in defense of his company's subsidiary.

Fastweb and its CEO Stefano Parisi are being investigated as part of an Italian probe, which has led to the arrest of Fastweb's founder Silvio Scaglia and sent shockwaves through Italy's telecoms sector and business and political circles.

Prosecutors allege money was laundered via fictitious international phone service purchases and sales worth more than 2 billion euros ($2.76 billion) between 2003 and 2006, carried out with the knowledge of top executives at Fastweb and Telecom Italia SpA's Sparkle unit.

Both Fastweb and Sparkle have denied any wrongdoing and say they are victims in the case.

Telecom Italia and Fastweb are the victims of a fraud, the French-language Le Temps quoted Swisscom's Carsten Schloter as saying.

If the courts determine finally that Fastweb carried out its due diligence correctly, the group should be able to recuperate 70 million euros in value-added tax, he said.

An Italian court is expected to decide soon on whether to appoint special administrators to run Fastweb and Sparkle.

We've asked ourselves if we could have discovered the criminal dimension at the time (2007). And I must say 'not at all', Schloter was quoted as saying.

Swisscom has said it had been aware of an investigation into tax evasion when it acquired Fastweb and that it had sought two separate opinions from tax consultants on the matter at the time.

The consultants found that the transactions in question were correct.

Fastweb, Italy's no. 2 telecoms operator, is controlled by Swisscom, the Alpine state's largest phone company and in which the Swiss government holds stake of more than 50 percent.

Schloter said it was unlikely Swisscom would take a hit to goodwill for Fastweb that it currently puts at 2.6 billion Swiss francs.

If it meets its growth targets, there's no reason to. So long as we don't loose big commercial clients of Fastweb's activities collapse entirely, the goodwill will remain unchanged. Up to now there's been no negative sign.

Schloter was quoted as saying on March 4 that he saw no reason to stop backing Parisi.

Schloter also told Le Temps he was open to an acquisition in Switzerland.

Abroad, things need to calm down and cleared up. In Switzerland, however, I see no obstacles for new buys. especially in the IT domain.

($1=.7257 Euro)