Italy awoke Tuesday to yet another corporate scandal with political overtones, as Milan prosecutors arrested the head of the state-controlled aerospace company Finmeccanica in an investigation related to the sale of 12 helicopters to India in 2010.
The Finmeccanica chairman and chief executive, Giuseppe Orsi, was taken in for questioning by prosecutors, as was Bruno Spagnolini, head of Finmeccanica’s Augusta Westland helicopter unit. Prosecutors also raided the Augusta Westland corporate offices in Milan.
The investigation is focused on whether company executives violated bribery and corruption laws in seeking the helicopter deal with the Indian military.
Prime Minister Mario Monti said Tuesday that the government — owner of a 30 percent stake in Finmeccanica – was prepared to do whatever necessary to clean up the company, the second-largest industrial group in Italy after Fiat.
“There is a problem with the governance of Finmeccanica at the moment and we will face up to it," Reuters quoted Mr. Monti as saying on RAI television.
Finmeccanica said Tuesday that “the operating activities and ongoing projects of the company will continue as usual.” In addition, the company expressed “support for its chairman and C.E.O., with the hope that clarity is established quickly,” while “reaffirming its confidence in the judges.”
The Indian Defense Ministry said in a statement that in “view of media reports” linking it with Finmeccanica’s Augusta Westland unit in Britain, it “had sought information” from the Italian and British governments, but that “no specific inputs” were received substantiating the allegations. The ministry said it was referring the case to the Central Bureau of Investigation, the Indian agency responsible for investigating corruption cases.
Italian press reports said two others, residents of Switzerland, were being sought by Milan prosecutors on suspicion that they had acted as middlemen.
A spokeswoman for Finmeccanica in London, Clare Roberts, declined to comment beyond the company’s official statement.
Prosecutors could not immediately be reached for comment.
Consob, the Italian stock market regulator, banned short selling of Finmeccanica shares for Tuesday and Wednesday, after the company's shares fell more than 10 percent in early trading.
The news was first reported by the Italian newspaper Corriere della Sera.
With national elections just two weeks away, the Italian establishment has been unnerved recently by a series of high-profile corporate investigations.
In one, Banca Monte dei Paschi di Siena, a Tuscan bank, has acknowledged using secret derivatives deals to mask hundreds of millions of euros in losses.
That investigation has focused attention on the role played by the Bank of Italy and its then-chairman, Mario Draghi, who is now president of the European Central Bank.
It has also given the former prime minister, Silvio Berlusconi, an issue with which to attack his political enemies as he angles for a comeback. The bank is based in Siena, in a part of northern Italy that is a stronghold of the leftist Democratic Party. Mr. Berlusconi, the conservative former prime minister who hopes to be a spoiler in the elections this month, has been trying to lay blame for the scandal at the Democratic Party’s doorstep.
Mr. Draghi asserted last week that the Bank of Italy had “done everything it should” with respect to the bank, adding that much of the criticism was “part of the regular noise that elections produce.”
In another case, Eni, the country’s biggest oil company, said last week that Milan prosecutors had expanded an investigation of alleged corruption at one of its subsidiries, Saipem, to include the parent company and its chief executive, Paolo Scaroni.
In a country that is rarely held up as a technological leader, Finmeccanica’s trendsetting AgustaWestland helicopter division and Alenia Aermacchi aeronautics unit are sources of national pride. Finmeccanica is among the world’s largest aerospace, defense and security companies, employing 70,000 people worldwide and reporting first-half 2012 revenue of about €8 billion, or about $10.7 billion.
Since taking over in May 2011, Mr. Orsi has sought to restore investor confidence by cutting debt and selling off nonstrategic operations, but the restructuring has lagged behind market hopes. On Jan. 18, Standard & Poor’s cut Finmeccanica’s credit rating to junk status and said the outlook was negative, citing the company’s failure to reduce its debt more quickly.
Mr. Orsi’s problems mark just the latest troubling chapter for Finmeccanica. He took over in May 2011 after his predecessor, Pier Francesco Guarguaglini, was himself felled by allegations involving the role of his wife, Marina Grossi, while she was chief executive of Finmeccanica’s Selex unit.
Reporting was contributed by Hari Kumar in New Delhi, Elisabetta Povoledo in Rome and Jack Ewing in Frankfurt.
Finmeccanica Chief Is Arrested in Bribery Case
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Finmeccanica Chief Is Arrested in Bribery Case
