Finmeccanica SpA, Italy’s biggest defense contractor, promoted Alessandro Pansa to chief executive officer to succeed Giuseppe Orsi, who was arrested two days ago on charges of corruption and tax fraud.
Pansa, 50, will continue to serve as chief operating officer, Rome-based Finmeccanica said yesterday in a statement following a board meeting. Orsi, 67, remains chairman until a shareholders meeting in April, a spokeswoman said by telephone.
Finmeccanica is moving to reassure shareholders after the stock slumped as much as 14 percent on Feb. 12, the day Orsi was arrested. The company, which has lost more than half of its market value since Orsi took the CEO post in May 2011, said Feb. 12 that it remains “fully operational” amid an Italian probe of allegations of illegal payments tied to a 560 million-euro ($753 million) contract with India for helicopters in 2010.
Pansa had previously served as chief financial officer before becoming chief operating officer. His appointment is permanent, according to the company.
“His appointment should make a strong strategic discontinuity less likely,” Gabriele Gambarova, an analyst at Banca Akros, said in a note to clients. “Pansa makes the investment case less risky, but the judicial investigations may trigger bad consequences.”
Orsi was praised today by former Italian Prime Minister Silvio Berlusconi, who said managers must make bribes in order to do business in some parts of the world. Italian prosecutors were wrong to arrest Orsi, Berlusconi said today in a televised interview on state broadcaster RAI3.
“These are absurd moralisms,” Berlusconi said. “If you want to make moralisms like that, you can’t be an entrepreneur on a global scale.”
Finmeccanica said it plans to convene a shareholder meeting on April 2 to appoint a new board. While Orsi formally retains the title of chairman, Pansa has effectively been given those powers because only the shareholders have the authority to strip Orsi of that position.
Pansa will now be charged with guiding Finmeccanica through its biggest reorganization in at least a decade as it seeks to dispose of 1 billion euros in assets to reduce debt exceeding 4 billion euros. The manufacturer has been pushing to sell its Ansaldo Energia power-plant construction unit, with the goal of announcing a buyer before Italian elections begin on Feb. 24.
Finmeccanica fell a third consecutive day, dropping as much as 2.3 percent and trading down 1.1 percent at 4.19 euros as of 2:48 p.m. in Milan, valuing the company at 2.4 billion euros.
The company’s Milan offices, Orsi’s house and premises of the AgustaWestland helicopter subsidiary in Italy were searched this week, two people familiar with the probe said. They asked not to be identified because the investigation is continuing.
The Indian Defense Ministry has asked the country’s Central Bureau of Investigation to probe the charges, saying it “is determined to take all possible legal and administrative action against guilty parties.”
The contract signed with AgustaWestland includes “specific contractual provisions against bribery and the use of undue influence as well as an integrity pact,” the ministry said on Feb. 12. It also has asked AgustaWestland to provide information on whether payments were made that violated existing rules.
India has frozen payments to AgustaWestland, the Defense Ministry said today in a statement. Three of 12 AW101 helicopters that India ordered in 2010 have already been delivered. Orsi led the AgustaWestland at the time the contract was awarded.
Orsi’s lawyer, Ennio Amodio, said in a Feb. 12 statement yesterday that evidence against his client is “inconsistent” and that the arrest is “unjustified.”
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