Advertisement

You will be redirected to the page you want to view in  seconds.

Future Cloudy for Finmeccanica CEO Giuseppe Orsi

Oct. 27, 2012 - 11:41AM   |  
By TOM KINGTON   |   Comments
Finmeccanica and its embattled CEO, Giuseppe Orsi, are under increasing public pressure as corruption probes into the firms' foreign sales continue to expand.
Finmeccanica and its embattled CEO, Giuseppe Orsi, are under increasing public pressure as corruption probes into the firms' foreign sales continue to expand. (Daniele Scudieri)
  • Filed Under

ROME — Finmeccanica and its embattled CEO, Giuseppe Orsi, are under increasing public pressure as corruption probes into the firms’ foreign sales continue to expand.

A former commercial director with the firm, Paolo Pozzessere, was arrested Oct. 23 in connection with an investigation into alleged kickbacks from Panama’s purchase of helicopters, satellite systems and homeland security systems in 2010, deals worth some 180 million euros ($233.4 million).

Police searched offices in Rome and Naples in connection with the investigation into Pozzessere, who had been advising Finmeccanica on sales in Russia.

Finmeccanica has endured years of scandal related to allegations of kickbacks, management impropriety and other problems connected to Orsi’s predecessor as CEO, Pierfrancesco Guarguaglini, and the political leadership of Italy’s former prime minister, Silvio Berlusconi. Those scandals pre-date Orsi, but he has not yet escaped taint, analysts said.

“This is negative for Finmeccanica’s reputation, and it is not clear if Orsi will survive,” said one Italian analyst, who declined to be named.

Finmeccanica has denied any wrongdoing in connection with the investigations.

But it’s clear investors are spooked: In the days following the arrest Oct. 23, Finmeccanica’s share price plunged 10 percent, partly due to the probes.

In addition to the arrest of Pozzessere, a former government minister has also been implicated in relation to another kickback investigation. Claudio Scajola, who served as industry minister under Berlusconi, is under investigation for allegedly seeking kickbacks in the potential sale of Italian-made FREMM frigates to Brazil. Italian state-owned shipyard Fincantieri is the prime contractor for those ships, but Finmeccanica is a partner on the program.

Scajola has denied any wrongdoing.

The probes were launched by the same team of magistrates in Naples that had previously investigated allegations that Orsi organized a kickback on a 560 million euro deal to sell AW101 helicopters to India in 2010, when he was CEO of Finmeccanica subsidiary AgustaWestland.

That investigation — which has since been transferred to a magistrate in northern Italy, closer to AgustaWestland headquarters — is focusing on Swiss entrepreneur Guido Ralph Haschke, who was arrested by Swiss authorities Oct. 19 in connection with the inquiry. He has since been released but remains under investigation by Italy.

The allegations originated with Lorenzo Borgogni, a former external relations manager at Finmeccanica who was fired in 2011 after Orsi became CEO and chairman. Borgogni, who admitted receiving payments worth 5.6 million euros from Finmeccanica supplier firms which was deemed in violation of company ethics, had worked alongside Guarguaglini, who stepped down as CEO in 2011 amid a corruption probe focused on Selex Sistemi Integrati, another Finmeccanica unit that had been headed by Guarguaglini’s wife.

“The accusations concerning Brazil, India and Panama started with declarations made by Borgogni,” a Finmeccanica spokesman said.

“Finmeccanica has not paid middlemen or bribes in India, nor has it paid bribes, commissions or middlemen in Panama.”

Finmeccanica is taking legal action against Borgogni, claiming defamation.

“We believe he started to make defamatory statements when he was sacked by Finmeccanica for violating the firm’s ethical code,” the spokesman said.

In a statement, Fincantieri denied paying any commissions or kickbacks in Brazil to sell 11 frigates, noting that in any case, “until now, no contract has been signed with the Brazilian Navy.”

Fincantieri made an offer to Brazil in August 2010 in partnership with Finmeccanica, although talks were complicated when Brazil declined to allow the extradition back to Italy of a convicted left-wing terrorist. The frigate deal is now being competed for by the U.K., France and Italy.

On Oct. 25, Italian newspapers published leaked details of an interview held by the Naples magistrates with Fincantieri CEO Giuseppe Bono, who said Valter Lavitola, an entrepreneur who advised Berlusconi on South America, had asked Bono for a commission since he had facilitated talks with Brazil for the frigate sale.

A Fincantieri spokesman confirmed the reported details.

Bono said he refused, noting Berlusconi had acted in keeping with his role in a governmental negotiation. Lavitola, also under arrest on suspicion of bribery, has been described by prosecutors as an unofficial “state representative” of Berlusconi and is being investigated for his role in Finmeccanica’s Panama contract.

Commenting on the probes and their impact on Orsi, a second analyst noted that the allegations concerned events that took place while Orsi’s predecessor, Guarguaglini, was at the Finmeccanica helm.

“Orsi ran AgustaWestland at the time of the India competition, but Guarguaglini was still his boss,” he said. “On the other hand, if this is true, it seems we are dealing with a system within Finmeccanica that could exist, Orsi or no Orsi.”

On Oct. 15, Orsi’s lawyer held a news conference during which he said Orsi would resign if the government told him to, but that “his personal intention is to stay on, defend himself and demonstrate that accusations against him are groundless.”

Close attention is being paid in Italy to whether members of the government, which holds a controlling stake in Finmeccanica, will back Orsi or support calls for his resignation from some politicians. When quizzed, Treasury Minister Vittorio Grilli and Industry Minister Corrado Passera have declined to offer support or to urge him to step down.

In a front-page editorial Oct. 24 titled “Time to decide,” Italy’s leading daily, Corriere della Sera, stated: “If the government does not want to, or does not know how to, give guidelines to management, then it should take the responsibility to sell it.”

Orsi was due to meet Prime Minister Mario Monti on Oct. 16 to discuss how Finmeccanica should react to the proposed merger between BAE Systems and EADS. When merger talks collapsed, the meeting was canceled, but Corriere della Sera remarked that Finmeccanica should now more aggressively pursue alliances since the “game that the merger would have put a stop to is now on again.”

The pressure on Orsi comes as he pushes through a restructuring plan that has harmed his support within the firm, and a debt repayment plan that involves selling off civil unit Ansaldo Energia. Following opposition in Italy to plans to sell the unit to Germany’s Siemens, the Italian government’s strategic investment fund has been touted as a buyer, although an Italian industrial source said no offer had yet been made.

“If Orsi falls, the whole restructuring plan and the sell-offs could be delayed as a new manager settles in,” the first analyst said. Orsi is CEO and chairman of Finmeccanica, but the analyst said the government may choose to install a new chairman while leaving Orsi in the CEO role.

More In World News

Start your day with a roundup of top defense news.

Subscribe!

Subscribe!

Login to This Week's Digital Edition

Subscribe for Print or Digital delivery today!

Exclusive Events Coverage

In-depth news and multimedia coverage of industry trade shows and conferences.

TRADE SHOWS:

CONFERENCES:

Defensenews TV

  • Sign-up to receive weekly email updates about Vago's guests and the topics they will discuss.