Two people alleged to have blackmailed Silvio Berlusconi were arrested in Rome on Thursday, in a move that further embarrassed Italy's embattled prime minister.

Giampaola Tarantini, who was arrested at dawn at his flat near Via Veneto – one of Rome's most expensive streets – was a central figure in a sex scandal that threatened to bring down Berlusconi two years ago.

In a statement to police published in September 2009, the businessman, from Bari in southern Italy, acknowledged supplying some 30 women for parties and dinners at the prime minister's Roman palazzo . He said at least six women had spent the night there.

Tarantini's wife, 34-year-old Angela Devenuto, was also taken into custody and a warrant was issued for the arrest of a third person believed not to be in Italy. According to Italian media reports, they are accused of receiving €500,000 (nearly £441,000) from Berlusconi along with benefits in kind including the rent on the Tarantinis' Rome flat.

Details of the investigation were leaked last month in a news magazine belonging to Berlusconi. The magazine, Panorama, claimed the prosecutors believed Tarantini was being paid to stop him contradicting the prime minister's claim that he was unaware that any of the women who visited his home were prostitutes.

Berlusconi, who turns 75 later this month, has made much over the years of his talents as a playboy. And he has repeatedly insisted he would never wish – or need – to pay a woman for sex.

Panorama said that, in telephone conversations secretly intercepted by police, Tarantini had repeatedly said Berlusconi was indeed oblivious of the payments the women were receiving.

The magazine claimed that the main reason why the prime minister was passing money to the businessman was to ensure he did a deal with the prosecutors to avoid a trial and the disclosure of "telephone wiretaps held to be embarrassing".

But Berlusconi told the magazine: "I helped someone and a family with children who found themselves and continue to find themselves in very serious financial difficulty. I didn't do anything illegal. I limited myself to helping a desperate man without asking for anything in exchange. That's the way I am and nothing will change that."

It is hard to imagine, however, what could be more compromising than the details that have already emerged. One of his guests has given an account of four-in-a-bed sex, while another said she had used a mobile phone to record her pillow talk with the prime minister.

Two years ago, recordings were posted to the web in which she and someone sounding like Berlusconi discussed, among other things, male orgasms and female masturbation. The prime minister's lawyers denied the recordings were genuine.