Italian police arrest Finmeccanica CEO in corruption probe as scandals taint election campaign

By Colleen Barry

THE ASSOCIATED PRESS

MILAN, Italy — The chief executive of Italian defence and aerospace giant Finmeccanica was arrested in a corruption probe Tuesday, the third corporate scandal to erupt during Italy’s hotly contested national election campaign.

Finmeccanica CEO Giuseppe Orsi is under investigation in a case involving the payment of bribes in the (euro)560 million ($670 million) sale of 12 helicopters to the government of India. Prosecutors in Busto Arsizio, north of Milan, ordered a search of Orsi’s home, as well as the headquarters of Finmeccanica’s AgustaWestland helicopter division.

Authorities also ordered the house arrest of AgustaWestland chief Bruno Spagnolini.

Orsi has denied any wrongdoing, and Finmeccanica and AgustaWestland both issued statements supporting the executives and calling the measures “precautionary.” Finmeccanica said operations at the company would continue normally.

The arrests for alleged corruption gave fuel to an already incendiary election campaign, with some candidates blaming Mario Monti’s technical government for not having done enough to shore up management at the company, which is 30 per cent state-owned and Italy’s second-largest industrial concern. Monti is currently leading a centrist movement in his campaign to be elected prime minister.

Monti, whose technical government has wrestled with the Finmeccanica case and pressured Orsi’s predecessor to resign due to other allegations, said the governance issues at the aerospace company would be dealt with “as soon as possible.” Monti said that anti-corruption measures need to be reinforced on a national level.

“It is important not only morally and civilly, but also economically because it facilitates economic investment in our country,” Monti said on state radio.

The Finmeccanica arrests come as Italian voters are digesting revelations of more than (euro)730 million ($987 million) in losses due to concealed derivative trades at the country’s third largest bank, Banca Monte dei Paschi di Siena, as well as accusations of corruption against the Eni gas and oil company and its CEO for the alleged payment of bribes for contracts in Algeria for its Saipem subsidiary.

The scandals have helped boost the popularity of a political movement founded by comic/political agitator Beppe Grillo, who has been filling piazzas with his anti-establishment message in the final weeks before the Feb. 24-25 national vote. The last polls of voter sentiment before the vote showed Grillo even or just ahead of Monti’s centrist movement, in third place behind the centre-left and centre-right candidates.

Prosecutors allege that bribery was part of the “company philosophy,” according the Italian news agencies that obtained copies of the arrest warrant. Prosecutors also allege Orsi tried to interfere with the investigation.

Orsi’s lawyer, Ennio Amodio, told reporters that the arrest orders were “devastating because it decapitates two of the largest companies in our country,” Italian news agencies quoted him as saying.

Meanwhile, in India, the country’s Defence Minister has ordered a separate investigation. The ministry, in a statement, saithat the deal included provisions against bribery and “the use of undo influence.”

Finmeccanica shares closed down 7.3 per cent to (euro)4.41 in Milan trading despite an order by the market watchdog banning short-selling of the company’s stock. Short-selling is when traders sell stock they do not actually own, hoping to buy it back at a lower price.

Fitch ratings agency also placed the company on negative watch following the arrests.

Finmeccanica and its executives have been the target of a wide-ranging, years-long investigation into alleged corruption in the awarding of international contracts. In 2011, Orsi took over at the helm of Finmeccanica when the previous chairman and CEO, Pier Francesco Guarguaglini, was also implicated in the bribery investigation.

Guarguaglini and his wife, who ran a subsidiary, are accused of setting up slush funds to funnel money to political parties.

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Ravi Nessman in New Delhi contributed to this report.

12:37ET 12-02-13