IT may have started 20 years ago as a simple job contract between a London lawyer and a wealthy Italian client, but the relationship between David Mills - barrister-turned-solicitor, offshore tax expert, and, crucially, husband of British culture secretary Tessa Jowell - and Italian Prime Minister Silvio Berlusconi has become the key to unlocking alleged corruption at the heart of the Italian government. The career of a key Cabinet minister is also on the line, putting a significant question mark over the judgement of Tony Blair.

Within the next few days Mills and his Italian lawyer, Federico Cecconi, will offer Milanese prosecutors his side of a string of accusations involving alleged money laundering, tax evasion, bribery and withholding evidence in a court of law.

Cecconi has every right to fear for the freedom of his English client. The Italian authorities have been here before with Berlusconi, 10 times; among the charges are illegal financing of political parties, tax fraud, illegal accounting, bribery involving judges and police officials. Yet in every case, Berlusconi has evaded imprisonment despite the crimes being legally proved on numerous occasions.

Statute of limitations, laws amended by the billionaire in his role as premier, each has helped "Il Cavaliere" as Berlusconi is known in Italy, to side-step the law.

If prosecutors are to fare better this time, Mills could prove crucial. He is central to many of the allegations facing the Italian prime minister after a business relationship dating back to 1980, when Berlusconi, after financial successes in residential projects, establishing Italy's first independent "national" television network and buying the Il Giornale newspaper, began expanding his film and TV rights company, Reteitalia.

London-based Mills - who subsequently became a partner in the Milan law firm Carnelutti & Co and ran its London affiliate - was brought in to incorporate Reteitalia Ltd in Britain. He was its company secretary for nearly a decade, exploiting loopholes in British tax law to maximise profits. Over the following years Mills went on to play an increasingly important role in Berlusconi's labyrinthine business empire.

Also in 1980, Berlusconi launched the Pubitalia advertising company, whose UK division - Pubitalia International - was set up by Mills five years later on behalf of a Berlusconi holding company, Fininvest.

Various UK versions of Reteitalia went on to become two of 29 companies in what was known as Fininvest "Group B".

Mills set up his law firm, CMM (Carnelutti Mackenzie Mills) in 1988, and it served as company secretary to 17 of the 29 companies, all kept off the main "Group A" Fininvest accounts.

SECRET trust companies acted as agents for Fininvest B, with financial institutions in the Bahamas, Jersey, Luxembourg, Switzerland and elsewhere acting as company bankers. Despite accusations that this offshore architecture was operating on the edge of the law, Mills insists the structures he helped set up - believed to total 64 offshore companies - involved nothing illegal.

That is not how the Italian authorities view the Fininvest network. In the mid1990s Italian prosecutors investigated Berlusconi over alleged bribes made to revenue inspectors and payments to the former prime minister, Bettino Craxi.

It was alleged billions of lire had been removed from Fininvest. CMM's London offices were searched. Craxi's business accounts hinted at the complexity of the Fininvest global structure, including companies in the Bahamas, British Virgin Islands and Channel Islands.

Craxi was godfather to one of Berlusconi's daughters and widely regarded as Berlusconi's most valued political ally. He gave Berlusconi the Italian equivalent of a knighthood, and pushed through a change in law that allowed Berlusconi's Mediaset company to become a national force. When corruption allegations circled around Craxi after his premiership, he fled to Tunisia in 1994 and died in exile.

Without a political back-up, Berlusconi had to seek other ways of fulfilling his business ambitions. The solution? He would become the prime minister.

Pubitalia, the advertising agency he formed in 1980, is the most successful selling machine in Italy. It was given a new task: to sell Berlusconi. With his media empire dominating every corner of Italy, Pubitalia created and "sold" Berlusconi's new political party, Forza Italia, in January 1994. Two months later, Berlusconi was PM, with 50 of the new parliamentary deputies Pubitalia employees.

Corruption allegations persisted. In 1996 Italian authorities asked accountants KPMG to look at Fininvest B's international operations and concluded that investments and control of TV companies in Spain and Italy were not permitted under Italian law, and balance sheets had been altered.

The coming trial is likely to focus on the links between Pubitalia and tens of millions of pounds alleged to have been laundered through the advertising agency's legitimate businesses; cash alleged to have come from the Mafia.

Mills's role at the helm of Pubitalia International is of significance to the Milan prosecutors, and in particular his relationship with Marcello Dell'Utri, Berlusconi's closest aid. On Fininvest instructions, Mills appointed Dell'Utri to Pubitalia International's board in 1985.

Mills maintains he never met Dell'Utri during his decade as a director, made no inquiries, and only obeyed instructions from his Italian client.

While Dell'Utri was at Pubitalia his other role for Berlusconi was as a political go-between with the Cosa Nostra. That is not illegal in itself, but in 1996 Dell'Utri was charged with going further, and aiding and abetting Mafia businesses. In a Palermo courtroom in Sicily, after a long trial, Dell'Utri was jailed for nine years, but he has yet to spend a day in prison, as he awaits the outcome of an appeal.

Mills is believed to have told Italian investigators his role in Pubitalia was limited to its London affiliate between 1985 and 1997. He has also insisted he had no knowledge of the transactions inside Fininvest. His role, he maintains, was structural. But Milan's "Berlusconi hunters" believe Mills's complex deals and knowledge of Berlusconi's hidden wealth could finally be the weak link that exposes the corporate empire of the Italian premier.

Berlusconi is campaigning for next month's general election at the same time as investigators are delving into a network of deception they believe allowed him to evade pounds-41.5 million in taxes.

Within the next two months, a judge will decide whether Berlusconi and Mills should face trial. The judicial decision, and evidence of the case, will be made public. If Mills is forced to defend his affairs in an Italian show trial likely to dissect the lawyer-client relationship between Mills and Berlusconi's many companies, on and offshore, it will have implications beyond the corridors of power in Italy.

As a former Labour minister said last week: "The prospect of a British Cabinet minister sitting in an Italian court supporting her husband in a corruption trial that could receive international attention is something Downing Street will dread."

Even without a trial, Jowell has been damaged, particularly by revelations that euros 500,000 was paid to Mills in 1999, the money reaching him via offshore companies and hedge funds. To bring the cash onshore, Mills is accused of remortgaging his London house and then using the liquidised offshore money to repay the loan quickly. Jowell says she signed for the loan on their joint property and asked no questions. But she has failed to explain two subsequent loans taken out on the home. The loans total pounds-875,000, more than the estimated pounds-700,000 value of their house.

Italian prosecutors maintain the euros 500,000 came from Berlusconi as a reward to Mills for "protecting" Berlusconi in two corruption trials in 1997.

How do they know this? Mills told them.

Worried about an Inland Revenue investigation into his 2002 earnings, Mills met his accountant, Bob Drennan of Rawlinson & Hunter, in February 2004.

He told Drennan he was concerned tax inspectors might find pounds-350,000 which, in a letter to Drennan, he said had come from "the B organisation". Mills's letter also discussed an earlier dividend payment of pounds-1.5m from "Mr B's companies".

Mills also mentioned trial evidence and "turning some very tricky corners" which had kept "Mr B out of a great deal of trouble". Drennan assumed Mills had been paid by Berlusconi to give false evidence during two trials in the 1990s.

Drennan then told the UK's National Criminal Intelligence Service what Mills had said and written. Five months later Mills was interviewed by prosecutors in Milan. Shocked at what they knew, he admitted he had "tried to protect" Berlusconi during inquiries and trials concerning the Fininvest Group. The pounds-350,000 (euros 500,000) had been "a debt of gratitude".

Four months later, in November 2004, Mills retracted this, saying he had lied, had spoken under duress and had been given the money by Neapolitan shipping magnate Diego Attanasio. Attanasio denied this, claiming he was in custody at the time, prior to receiving a three-year sentence for corruption.

Whether Number 10 offered Jowell an ultimatum to stay in the Cabinet or defend her reputation from the backbenches is not known. But the separation of Mills and Jowell puts distance between Jowell and her husband's affairs.

Mills, however, is likely to need all the moral support he can find to fight charges that could end up costing him 12 years in prison. Losing the overt support of his wife is damaging - and the timing could not be worse. Mills's reputation has already taking a battering. Last November he applied for a legal licence to work in Dubai. It was refused on the basis that he had answered "no" to a question on whether or not he had been the subject of any official investigation.

Mills appealed to the authorities in Dubai, telling them effectively: Do you not know who my important politician wife is? Do you not know I have the full support of Britain's Prime Minister? It didn't work. The Dubai authorities told him: "You have a duty to provide full, true and plain answers - as a lawyer you must be aware of this."

If he faces a court in Milan he will be put on oath to do exactly that. And his wife won't be there to help him.


1997 Italian prime minister Silvio Berlusconi is found guilty of bribing tax officials to obtain favourable audits for his firms. dollars-2 million deposited in an account run by Mills.

1998 Berlusconi is convicted of paying disgraced former prime minister Benito Craxi.

The convictions are overturned on appeal.

2002 Mills withdraws dollars-600,000 to pay off a mortgage he and Jowell had out on their home in London. Jowell signs for a second pounds-250,000 loan secured on the home.

2003 Prosecutors in Italy investigate Mills and Berlusconi in connection with alleged tax evasion and embezzlement

2004 Mills writes to his accountants, saying that a sum of dollars-600,000 had been placed in a hedge fund for him after he gave evidence that "kept Mr B out of a great deal of trouble". During interviews with Italian authorities Mills said the letter was genuine and did relate to Berlusconi.

An Italian newspaper reports that Mills withdrew his statement.

Jowell claims this is when her husband disclosed to her that he received the money at all. Mills has since insisted he did not receive any bribes from Berlusconi and the letter was invented as part of an effort to get advice about a tax issue.

Feb 06 Jowell becomes embroiled in the controversy. Italian prosecutors believe the mortgage arrangement allowed the money to be brought into the UK.

March 06 Jowell's explanation for her failure to declare the cash was accepted by the Prime Minister, left, . . . that she paid tax on the dollars-600,000 as soon as she learned of it.

Yesterday . . . Jowell and Mills announce they are to separate. Berlusconi may be indicted over fresh allegations and magistrates have indicated that Mills would be a defendant.