Giuseppe Orsi, Chief Executive Officer of Finmeccanica, the
large Italian defense contractor, was arrested overnight in Italy
on charges that he and his company bribed Indian officials to win
defense contracts. Finmeccanica shares fell as much as 14 percent
after being halted in Milan on the news release.
Orsi and Bruno Spagnolini, the head of the AgustaWestland U.S.
helicopter unit, were both arrested on charges of bribery in
relation to the sale of defense goods to India. Orsi has denied
the charges and the investigation continues in Italy. The Milan
offices of Italy's biggest defense company, Orsi's house and
premises of AgustaWestland in Italy were searched.
Orsi has been undertaking a large downsizing undertaking at
the company, its biggest revamp in a decade. Orsi is under
pressure to deliver $1.3 billion in asset sales to reduce about
$5.4 billion in debt. The company had been hoping to close on the
sale of its Ansaldo Energia business before the Italian elections
begin on February 24.
It is now unclear whether the Board of Directors will be able
to approve these asset sales with the plan's lead proponent now
under arrest. The Board was set to meet on February 21 to discuss
these asset sales. Standard & Poor's cut Finmeccanica's debt
rating below investment grade last month over concern that asset
sales would not sufficiently improve capital levels.
Authorities are investigation alleged illegal payments tied to
the sale of 12 EH101 helicopters to India, which the company has
strongly denied. The probe follows at least two other corruption
investigations involving the Rome-based defense contractor
including one that led former Chairman Pier Francesco
Guarguaglini resigned after a probe targeted him that led to
criminal charges against his wife, who also ran a Finmeccanica
"There is an issue with the governance of Finmeccanica at the
moment and we will deal with it," Italian Prime Minister Mario
Monti said today on state-owned RAI television. The government
did not offer any further comment since the investigation is
Finmeccanica shares fell as much as 14 percent after being
halted in Milan but rallied slightly to 4.358 euros per share, or
a loss of over eight percent. Other industrial stocks in Italy
fell in tandem, including Fiat (OTC:
) and Pirelli.
(c) 2013 Benzinga.com. Benzinga does not provide investment
advice. All rights reserved.
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