Finmeccanica board replaces embattled chairman

AP News
Posted: Dec 01, 2011 2:57 PM
Finmeccanica board replaces embattled chairman

The board of the state-controlled aerospace and engineering giant Finemeccanica on Thursday replaced its embattled chairman, turning over his duties to the company's CEO.

The company is 30-percent controlled by the Italian Treasury. A spiraling corruption probe into allegations of a slush fund to funnel money to political parties has been one of the first emergencies for Italian Premier Mario Monti's fledgling government.

Monti had called for a "rapid and responsible solution," a statement that increased pressure on chairman Pier Francesco Guarguaglini to step down. He resigned Thursday.

The board announced in a statement following an emergency meeting that CEO Giuseppe Orsi would also take on the chairman's role. Orsi, who formerly ran the subsidiary AugustaWestland, replaced Guaguaglini as CEO in May.

"The entire Board of Directors expresses its sincere thanks to Pier Francesco Guarguaglini for the high level of professionalism and commitment he has shown as Chairman and CEO from 2002 to 2011, which have enabled the Group to grow and strengthen its position on world markets," the board said in a statement.

Guarguaglini is under investigation for making false invoices and tax fraud, while his wife Marina Grossi, the CEO of the subsidiary Selex, is under investigation for creating false invoices and corruption. Both have denied wrongdoing.

The probe by Rome prosecutors centers on accusations that Selex set up a system of false invoices created to evade taxes and used the proceeds to set up a euro2 million ($2.7 million) slush fund to pay off political go-betweens. The alleged corruption revolved around contracts for Italy's air traffic controllers body, ENAV.

Top politicians have been accused of receiving cash payments of up to euro200,000, which they denied.

Last month, the head of ENAV was placed under house arrest for allegedly illegally financing political parties. The head of sales at Selex, a technology company specializing in homeland defense including radar systems, also was placed under house arrest.

Finmeccanica is a global player in defense and aeronautics, which the Italian state would be loath to see further damaged by the scandal. It employs more than 75,000 people worldwide and focuses on designing and manufacturing helicopters, civil and military aircraft, satellites, space infrastructure, missiles and defense electronics.

In 2008, it bought the U.S. military contractor DRS Technologies Inc. in a $5.2 billion deal that Finmeccanica sought to boost its role as a key supplier of defense and security systems.

But recently, the company has been performing poorly. Orsi, who was reportedly at odds with Guarguaglini, announced a cost-savings plan after the company reported third-quarter losses of euro358 million. The company earlier had issued a profit warning due to structural problems at aeronautics, problem contracts in its transport sector and deteriorating global financial conditions.

The Fim-Cisl union said the grave allegations must be clarified and the system cleaned up so that Finmeccanica can emerge "strong, healthy and sustainable."