March 28, 2024

Eni Scrambles to Contain Damage From Inquiry

ROME — Eni, the Italian oil giant, was scrambling Friday to contain the fallout from the investigation of alleged corruption at its oil services subsidiary Saipem.

Milan prosecutors said late Thursday that they had expanded their inquiry into allegedly suspicious payments in Algeria involving Saipem to include Eni itself and its chief executive, Paolo Scaroni.

Investigators have searched Mr. Scaroni’s home in Milan and his offices in Rome and Milan. Prosecutors now have eight people, most of them former Saipem executives, under investigation, according to people who have seen the court documents.

Mr. Scaroni said by telephone Friday that he believed he came into the prosecutors’ sights because of a meeting he held in late 2007 at a Paris hotel with Chakib Khelil, who was then the Algerian minister of energy and mines. Mr. Khelil was accompanied by a personal secretary named Farid Bedjaoui, who was allegedly a conduit for money from Saipem, according to people who have seen the court documents.

Mr. Scaroni said that he had met often with Mr. Khelil but denied that he ever sought favors for Saipem from the Algerian or anyone else.

“What is certainly sure is I never spoke to either Khelil or any other minister about Saipem,” he said. Neither Mr. Bedjaoui nor Mr. Khelil could be reached for comment. There is no suggestion that Mr. Khelil is under investigation.

Eni denied on Thursday that it or its directors had any involvement in any corruption in Algeria.

“Eni and its C.E.O. declare themselves totally unrelated to the object of investigation,” the company said.

Under scrutiny are about €200 million, or $268 million, in payments on Algerian contracts won by Saipem, which provides drilling, engineering and construction services. The inquiry started at least two years ago, and Algerian investigators are working closely with their Italian counterparts, according to Eni.

The investigation has weighed heavily on Saipem’s share price and is now casting a cloud over the top management of Eni, which had been reveling in its recent success in finding new energy reserves, particularly giant natural gas discoveries in Mozambique over the past two years.

The investigation threatens to expose an unsavory side of a decades-old tightly intertwined relationship between Algeria and Sonatrach, its national oil company, and the Italian government and energy companies. Eni is the largest oil and gas producer in the North African country, and it separately buys an additional €7 billion to €8 billion worth of gas each year from Algeria. Algeria supplies about 30 percent of Italy’s gas.

Saipem had been a dominant player in Algeria, building gas pipelines and other elements of energy-industry infrastructure, including the Medgaz undersea pipeline from Algeria to Spain. People familiar with the investigation say that in 2007 Saipem had agreed to pay a Dubai company a percentage of the value of the contracts Saipem won in Algeria. Prosecutors say the company won more than $10 billion in contracts in the country in the late 2000s.

A spokesman for Saipem declined to comment.

When Mr. Scaroni learned of this deal and the payments in November, he said, he thought the arrangement was inappropriate because Saipem’s board had not been informed. On Dec. 3 he wrote a letter to Saipem’s chairman, Alberto Meomartini, suggesting that the Saipem board consider various emergency steps, including replacing the chief executive, possibly with Umberto Vergine, an Eni executive.

Two days later, Pietro Franco Tali resigned as Saipem’s chief executive. At the same time, Eni’s chief financial officer, Alessandro Bernini, who had held the same post at Saipem, resigned. Mr. Tali was replaced by Mr. Vergine. Saipem said on Jan. 29 that Mr. Tali was under investigation.

Mr. Scaroni dismissed a question about whether he regretted not supervising Saipem more closely, saying that Eni took a hands-off approach to avoid scaring off Saipem’s other clients, which include most of the big oil companies.

“We always felt that if we were too close to Saipem then Saipem would have lost clients,” Mr. Scaroni said.

It will not be easy for Eni to distance itself from Saipem.

Article source: http://www.nytimes.com/2013/02/09/business/global/eni-scrambles-to-contain-damage-from-inquiry.html?partner=rss&emc=rss

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