Bloomberg News

Monti Calls on Finmeccanica to Take ‘Quick’ Action on Probe

November 24, 2011

Nov. 23 (Bloomberg) -- Italian Prime Minister Mario Monti called on state-controlled defense company Finmeccanica SpA to swiftly respond to a corruption probe that has prompted calls for Chairman Pier Francesco Guarguaglini to resign.

Monti said he’s “carefully monitoring” Rome-based Finmeccanica’s situation and expects a “quick and responsible” solution, according to an e-mailed statement late yesterday. The competent ministers will verify whether the company is taking the “necessary initiatives,” according to the statement.

Guarguaglini yesterday denied the company had set up slush funds or that he had given orders to pay off politicians. He made the statement after Lorenzo Borgogni, the company’s external-relations director, resigned his position amid a criminal investigation into possible illicit payments aimed at winning business for the defense contractor.

Guarguaglini expressed “confidence” in prosecutors investigating allegations of bribery carried out by executives at companies controlled by Finmeccanica, Italy’s biggest defense contractor, according to an e-mailed statement. SELEX Sistemi Integrati, one of the units at the center of the probe, is run by Guarguaglini’s wife, Marina Grossi. A company spokesman, who declined to be identified because of company policy, denied Guarguaglini was ready to resign.

Pressure to Quit

The Finmeccanica chairman has been under pressure to resign amid a number of corruption probes since last year. He has repeatedly denied any wrongdoing. The Italian government, which controls Finmeccanica with a 32 percent stake, in April named former Augusta Westland chief Giuseppe Orsi to replace Guarguaglini as chief executive officer, though Guarguaglini remained chairman.

Guarguaglini didn’t attend a board meeting last week to sign off on quarterly results, fueling speculation of a feud with Orsi. The company declined to say why he failed to attend.

Antonio di Pietro, head of the Italian Values party and a former anti-corruption prosecutor, filed a request with Monti’s new government, to urgently revoke Guarguaglini’s powers, news agency Radiocor reported yesterday.

Finmeccanica shares gained 0.3 percent to 3.01 euros in Milan trading yesterday, after falling 6.6 percent on Nov. 21 after the announcement that Borgogni had stepped down from his post. The shares have fallen almost 65 percent this year.

A management reshuffle would be “positive” because “it will reduce the negative press on the company,” Mediobanca SpA wrote in a note Nov. 21. “We see few risks of the legal investigation having direct consequences on Finmeccanica.”

Illicit Payments

Borgogni is under investigation over possible illicit payments as part of a criminal inquiry in Rome into contracts for Enav SpA, Italy’s air-traffic control agency, Ansa news agency reported. Borgogni said he “has always acted with respect for the law and in the best interest of the group,” according to a statement from Finmeccanica.

Grossi, the head of SELEX, refused a request from Orsi to resign following a board meeting Nov. 21, Il Sole 24 Ore reported. Grossi, a suspect in the Rome investigation, has denied any wrongdoing.

“It’s important that it becomes clear that Orsi has complete authority to carry out the necessary changes,” said Nick Cunningham, managing partner at London-based research company Agency Partners. Internal disputes at the company “are damaging, because it makes it ambiguous as to who is in control.”

The company is planning to sell at least 1 billion euros ($1.4 billion) of assets in mainly civilian units through 2012 after forecasting a surprise loss this year.

--With reporting from Chiara Vasarri in Rome. Editors: Andrew Davis, Ben Livesey

To contact the reporters on this story: Sabine Pirone in London at spirone@bloomberg.net; Marco Bertacche in Milan at mbertacche@bloomberg.net

To contact the editor responsible for this story: Benedikt Kammel at bkammel@bloomberg.net Angela Cullen at acullen8@bloomberg.net


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