Italy rocked as Finmeccanica chief arrested

By EMILIO PARODI
Published on 13/02/2013 00:00

ITALIAN police have arrested the head of defence group Finmeccanica over bribery allegations, adding to a series of corporate scandals shaking Italy less than two weeks before a general election.

Finmeccanica chief executive and chairman Giuseppe Orsi was arrested over bribes allegedly paid to secure the sale of 12 helicopters to India, when he was head of the group’s AgustaWestland unit.

Police were yesterday searching Orsi’s home and the offices of AgustaWestland close to Milan. The Milan offices of state-owned Finmeccanica, Italy’s second-biggest corporate employer after Fiat, were also searched.

Orsi is accused of paying bribes to intermediaries to secure the sale of 12 helicopters in a €560 million (£482m) deal when he was head of the group’s AgustaWestland unit.

“AugustaWestland and its management seem to be used to paying bribes and we have reason to believe that such a corporate philosophy could be repeated in the future if not stopped through an arrest,” judge Luca Labianca wrote in the arrest warrant.

An Indian defence ministry source said kickbacks worth 40 million rupees (about £475,000) allegedly paid to Indian officials to push contracts Finmeccanica’s way were being investigated and that Delhi was considering the deferral of the helicopter deal.

The Italian business world has been shaken in recent weeks by a series of corruption cases, notably a derivatives scandal at Italy’s third-largest lender, Banca Monte dei Paschi, and an investigation into alleged bribery over contracts in Algeria that has hit oil company Eni.

Highlighting the political sensitivity of the Finmeccanica case ahead of national elections on 24 and 25 February, prime minister Mario Monti told state television: “There is a problem with the governance of Finmeccanica at the moment and we will face up to it.”

Orsi, a long-serving defence industry executive, denies any wrongdoing with regard to the corruption inquiry, which has been going on for a year.

The wave of corporate scandals has become an issue in Italy’s parliamentary election campaign. Orsi’s appointment to lead the indebted defence group in May 2011 was backed by the Northern League party, an ally of then prime minister Silvio Berlusconi.

Orsi was appointed when the previous chairman and chief executive, Pier Francesco Guarguaglini, was himself 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. Centre-left politicians had called for Orsi to step down when he was first targeted in the corruption investigation.

“Some of the parties clearly have an interest in playing the justice card for political capital in view of the vote,” said Stefano Zamagni, professor of economics at Bologna University.

Besides Orsi, three other people have been placed under house arrest, including AgustaWestland chief Bruno Spagnolini.

Under Indian defence procurement rules, companies involved in corruption can be punished with blacklisting and fines. India, currently the world’s largest weapons importer, has a history of corruption in defence deals. A multi-million dollar scandal in the 1980s over the purchase of Swedish Bofors artillery guns contributed to an electoral defeat for then prime minister Rajiv Gandhi.