Italy politician arrested in widening funding scandal

ROME (Reuters) - A senior Italian regional politician was arrested on Tuesday in a widening corruption scandal that could damage former Prime Minister Silvio Berlusconi's already weakened centre-right party ahead of a national election in April.

Financial police arrested Franco Fiorito, former leader of Berlusconi's People of Freedom (PDL) party in the regional parliament of Lazio, on suspicion of embezzlement, a justice system official said. His lawyers confirmed the arrest.

The arrest is the latest development in a scandal that has further tarnished the already abysmal image of Italian politics and weakened the PDL, which has been deeply divided since Berlusconi was forced to step down last year.

Dozens of other regional politicians are also alleged to be involved in the scandal which prompted the resignation last week of Lazio president Renata Polverini, whose departure is expected to trigger new regional elections within the next few months.

Italian newspapers have carried accounts of lavish parties and dinners apparently paid for with public funds and held by politicians in Lazio, the region surrounding the capital Rome.

One particularly damaging series of photographs shows revellers clad in togas and pig masks, underscoring the decadent image of the political class in a country facing deep recession and financial crisis.

The portly, bearded Fiorito had already been under investigation by magistrates over accusations that he embezzled around 1.3 million euros of party funds and used the money for a Sardinian holiday, expensive restaurants, cars and luxury goods.

In Italy, political parties receive state financing, meaning the money alleged to have been embezzled ultimately came from public funds.

However Fiorito's lawyer Carlo Taormina said his client should not have been arrested for embezzlement and that many other politicians were also involved in the affair.

"There's a legal argument which says that when this public money goes into the pockets of the party, whether you like it or not, it becomes private money," he told TGCom24 television. "And you also have to say that if they've arrested Fiorito, the other 70 regional councillors in Lazio are missing from the list."

Earlier this month, Fiorito told investigators that many other regional councillors were involved in a well-established system of sharing out party funds among themselves.

Berlusconi and PDL party secretary Angelino Alfano have attempted to distance themselves from the scandal, calling for an overhaul of party financing rules and tougher penalties on those guilty of abusing party funds.

But with recent opinion polls showing the PDL trailing both the centre-left Democratic Party and the anti-establishment 5 Star Movement, the scandal has added a further obstacle six months away from the election.

(Writing by James Mackenzie; Editing by Angus MacSwan)