Finmeccanica boss under fire amid graft probe

MILAN Thu Apr 26, 2012 10:24pm IST

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MILAN (Reuters) - The head of Italian defence firm Finmeccanica is facing pressure from politicians and the media to step down after becoming the target of a bribery probe that threatens to disrupt his attempts to turn round the loss-making conglomerate.

Chairman and CEO Giuseppe Orsi is under investigation in Naples after a disgruntled former employee, himself under investigation, accused him of greasing an Indian helicopter contract and giving 10 million euros in kickbacks to the Northern League party to win political support.

Orsi, former head of the group's helicopter unit AgustaWestland, has vigorously denied any wrongdoing.

The inquiry, just four months after the company's previous boss quit in a separate corruption scandal, has fueled media speculation Orsi could resign and on Thursday an opposition party called for an overhaul of top management at Finmeccanica, which is 32-percent owned by the state.

"The only solution is to immediately replace the top management as they have been appointed only to please certain political parties," said Antonio Di Pietro, a firebrand, former anti-graft magistrate who now leads the Italy of Values party.

An editorial article on Wednesday in Italy's leading newspaper, Corriere della Sera, said Orsi should consider stepping down in an "unilateral act of responsibilty".

Prime Minister Mario Monti, who strengthened Orsi's powers last year to restructure Finmeccanica and is also Treasury Minister, declined to comment on the issue on Wednesday.

While he will have the final say, Industry Minister Corrado Passera appeared to give Orsi a lifeline on Thursday by saying "the opening of an investigation doesn't seem to me to be a good justification to destabilize the group."

Italian newspapers have started to speculate on names of possible successors to Orsi, mentioning the company's Chief Financial Officer Alessandro Pansa, Telecom Italia Chairman Franco Bernabe and Giuseppe Zampini, CEO of Finmeccanica unit Ansaldo Energia, as likely candidates.

Orsi said in a statement on Thursday he was "stunned by how his personal and professional credibility ... was put into question with such a superficiality."

AN UNWELCOME DISTRACTION

The case undermines Italy's image abroad as it comes hot on the heels of several high-profile corruption scandals involving Italian lawmakers across the political spectrum.

The probe is piling pressure on Orsi at a time when Finmeccanica, Italy's second-biggest industrial group after carmaker Fiat, is busy trying to sell assets for 1 billion euros this year to avoid having its credit rating downgraded to junk.

"Pushing through a restructuring such as the one Finmeccanica is planning requires a tremendous amount of focus from management," said Phil Finnegan, director of corporate analysis at U.S. defence industry research company Teal Groul. "This sort of investigation is certain to distract from that."

Finmeccanica's shares, which have lost 65 percent over the past 12 months, fell 4 percent to 3.22 euros On Thursday, with traders citing uncertainty over a possible management shake-up.

Troubles hit Finmeccanica last July, when it emerged that long-standing chairman Pier Francesco Guarguaglini was being investigated in a complex, separate probe alleging the group had created false invoices and slush funds to bribe politicians.

Guarguaglini left in December, making room for Orsi, who became the first top manager of a state-controlled business to be appointed by Monti.

Under Orsi's direction, Finmeccanica carried out a clean-up of its accounts that led to a 2011 net loss of 2.3 billion euros, laying the ground for possible profit this year.

The company will unveil first quarter results next week.

Orsi, an aeronautical engineer who started his career 39 years ago in a small firm now part of the conglomerate, is pushing hard to get the restructuring and cost savings done.

The CEO, liked for his frank style, has fired dozens of managers, including the one who is now accusing him of graft.

"The job Orsi has done since he became CEO has been very good. He is very transparent with the market and open about all issues," said Morgan Stanley analyst Rupinder Vig. "Arguably, he faces some hard problems. I don't think these allegations will change that. He will get the restructuring done."

(Additional reporting by Stephen Jewkes in Milan and Roberto Landucci in Rome, Writing by Lisa Jucca; Editing by David Cowell and Mark Potter)

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