Italy's Mediaset was again caught up in a whirl of controversy this weekend after a Milan court accused the group's president, Fedele Confalionieri, of unlawful rights-trading. Investigating prosecutors also lifted the lid on the conflict of interest issue, one of the hottest points of contention for Mediaset and current prime minister Silvio Berlusconi.

According to leading Rome daily La Repubblica, Milan prosecutors have accused Mediaset - and by association Confalonieri - of selling television rights and then buying them back at a hugely inflated price - $171 million above their real value - through two Malta-based companies.

Prosecutors charged that the transaction was used to obtain tax breaks which had first been ratified by treasury minister Giulio Tremonti in 1994, when Mediaset founder Berlusconi served a short stint as the country's prime minister.

The investigating financial guard said Mediaset had applied the financial benefits - designed for groups that reinvest their profits into company activities - to TV rights investments totalling $127.4m (270bn lire) in 1994 and $306.6m (650bn lire) in 1995.

On Friday Sep 21, the financial guard searched Mediaset's Milan headquarters for the second time in three months, as it continues to focus on benefits which Berlusconi's media conglomerate, Fininvest, would have received during his first seven-month term in government. The European Union Commission is also conducting its own investigation into the matter.

Meanwhile, Mediaset argued that it had already demonstrated the "correctness" of its operations when the group floated on the Milan stock exchange in 1994.

The conflict of interest issue, however, continues to be a bone of contention for Mediaset and Berlusconi. Both recently came under political fire again after the Pirelli-owned Telemontecarlo/La 7 said it would become an all-news channel, thereby abandoning its highly touted plans to become the country's third TV pole.

Last June, in an attempt to address similar conflict-of-interest issues, Berlusconi drafted a proposal to let a team of three "wise men" oversee financial operations at Fininvest and look into "any acts contrary to the public interest."