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Finmeccanica Chief Is Arrested in Bribery Case

February 12, 2013 by Leave a Comment

PARIS — Italy awoke Tuesday to yet another corporate scandal with political overtones, as prosecutors in Milan arrested the head of the state-controlled aerospace company Finmeccanica in an investigation related to the sale of 12 helicopters to India in 2010.

The Finmeccanica chairman and chief executive, Giuseppe Orsi, was taken in for questioning by prosecutors. Bruno Spagnolini, head of the AgustaWestland helicopter unit of Finmeccanica, was placed under house arrest. The authorities also raided the AgustaWestland corporate offices in Milan.

The investigation is focused on whether company executives violated bribery and corruption laws in seeking the €560 million, or $753 million, helicopter deal with the Indian military.

Prime Minister Mario Monti said Tuesday that the government, which owns a 30 percent stake in Finmeccanica, was prepared to do whatever was necessary to clean up the company, the second-largest industrial group in Italy, after Fiat.

“There is a problem with the governance of Finmeccanica at the moment and we will face up to it,” Mr. Monti said on RAI television.

The Italian economy ministry issue a statement saying that despite the government’s stake in the company, it is not involved in the day-to-day operations of Finmeccanica. But it said the government would cooperate with the prosecutors’ investigation and ensure that a management was put in place to ensure “transparency in its decision making.”

With national elections just two weeks away, the Italian establishment has been unnerved by a series of corporate investigations. In one, Monte dei Paschi di Siena, a bank in Tuscany, has acknowledged using secret derivatives deals to mask hundreds of millions of euros in losses.

In another case, Eni, the country’s biggest oil company, said last week that Milan prosecutors had expanded an investigation of alleged corruption at one of its subsidiaries, Saipem, to include the parent company and its chief executive, Paolo Scaroni.

Some observers say the spate of scandals suggests that prosecutors are taking advantage of a political vacuum before the election to move on cases for partisan ends.

But James Walston, a professor of political science at the American University of Rome, said it was unlikely that the cases had been timed to the coming elections. “Someone might have moved some papers a little faster with that in mind,” he said, but “it won’t make a huge difference” to voters.

The effect of these scandals is more to alienate people and persuade them not to vote, rather than to change their minds, Mr. Walston added.

Finmeccanica said Tuesday that “the operating activities and ongoing projects of the company will continue as usual.” In addition, the company expressed “support for its chairman and C.E.O., with the hope that clarity is established quickly.”

The Indian Defense Ministry said in a statement that in response to media reports linking it with AgustaWestland in Britain, it was seeking information from the Italian and British governments, but had not learned of any evidence to substantiate the allegations. The ministry said it was referring the case to the Central Bureau of Investigation, the Indian agency responsible for investigating corruption cases.

News of the investigation was first reported by the Italian newspaper Corriere della Sera.

Italian press reports said two other people, residents of Switzerland, were being sought by Milan prosecutors on suspicion that they had acted as middlemen.

A spokeswoman for Finmeccanica in London, Clare Roberts, declined to comment beyond the company’s statement. Prosecutors could not immediately be reached for comment.

Consob, the Italian stock market regulator, banned short-selling of Finmeccanica shares on Tuesday and Wednesday after the company’s shares fell more than 10 percent in early trading. The stock closed down 7.3 percent on Tuesday. A short sale is a bet that a company’s stock will fall.

The case puts the company, which is in the middle of a critical restructuring, in a difficult position. A board meeting is expected to be called soon to discuss whether to appoint an interim chief executive.

Article source: http://www.nytimes.com/2013/02/13/business/global/finmeccanica-chief-is-arrested-in-bribery-case.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Moody’s Downgrades Hungary

November 26, 2011 by Leave a Comment

Moody’s said late Thursday that it was cutting Hungary to a speculative rating of Ba1 from Baa3, its lowest investment grade, and was maintaining a negative outlook on the debt. The agency cited its doubts about whether the government of Prime Minister Viktor Orban would be able “to meet its targets on fiscal consolidation and public-sector debt reduction over the medium term, in view of higher funding costs and the low-growth environment.”

The benchmark Budapest stock index fell 3 percent, while the currency, the forint, and Hungarian bond prices sagged.

While Hungarian bonds had been trading at levels suggesting investors already treated the debt as junk, Mr. Orban had said Nov. 18 that Hungary would seek “an insurance-type agreement” from the I.M.F. in a last-ditch effort to keep its investment grade.

The Economy Ministry, in a statement cited by Reuters, called the ratings agency’s move the latest in a string of “financial attacks against Hungary.”

The Hungarian downgrade was just one of several to European Union countries. On Friday, Standard Poor’s cut its rating for Belgium to AA from AA+, still investment grade, but said the outlook was negative. And Fitch Ratings on Thursday cut its rating on Portugal to junk, citing similar concerns about the trajectory of government finances.

The biggest ratings question hanging over Europe now is whether France, which holds a coveted triple-A rating from all the major agencies, will be able to hang on to its status. A downgrade of France would have painful repercussions for the European bailout fund and for the euro.

Hungary’s public debt is uncomfortably high for an emerging-market country, equivalent to about 81 percent of its gross domestic product, a figure the government hopes to reduce to 50 percent by 2018. The budget deficit is relatively benign, and Mr. Orban has made keeping it under control a hallmark of his leadership, targeting a level of 2.5 percent of G.D.P. next year.

Moody’s warned that the outlook for the economy and government finances was being increasingly clouded by slowing growth, higher interest rates stemming from the euro crisis and the weakening of key export markets. Those risks are magnified by the fact that two-thirds of government debt is denominated in foreign currencies.

Hungary got a €20 billion, or $26.5 billion, bailout from the I.M.F. and European Union in 2008; it exited the fund’s stewardship last year.

Mr. Orban has enacted tough measures, widely described as “unconventional,” to keep the economy afloat. He has nationalized pension funds, imposed new taxes on services and decreed that Hungarians, many of whom borrowed in other currencies to finance their homes during the credit boom, can pay off their foreign-currency-denominated mortgages at artificially favorable rates — at the expense of mortgage lenders.

But those measures, many of which are one-time events, have run afoul of the I.M.F. and European Union, and some of them will probably have to be dismantled as the price of any new deal.

Tathagata Ghose, an economist with Commerzbank, wrote in a research note that the credit downgrade was not unexpected, as the Economy Ministry had itself suggested the action was imminent. “The negative connotation in terms of dwindling foreign capital participation is obvious,” Mr. Ghose said. “But, there could also be a positive outcome: We think that a much needed reversal to the present policy framework may finally be in prospect.”

Article source: http://www.nytimes.com/2011/11/26/business/global/moodys-downgrades-hungary.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

German E.Coli Sickens 8 in France

June 25, 2011 by Leave a Comment

Sprouts were also identified as the source of the German outbreak. French officials have not yet determined if the two episodes are connected.

But public health experts in the United States said the new outbreak raised concerns that contaminated seeds from a common supplier might be the ultimate source of the E. coli bacteria. If those seeds are still in circulation, other outbreaks could occur.

The French health authorities said that seven of those who had become sick attended a charity event at a children’s play center in Bègles, a suburb of Bordeaux, on June 8. Most of the people who became ill recalled eating gazpacho garnished with sprouts.

French investigators traced the sprouts served at the event to seeds bought at a garden store chain, Jardiland, according to a news release from Frédéric Lefebvre, a secretary of state attached to the economy ministry.

Mr. Lefebvre said the seeds were supplied by a British company, Thompson Morgan. Although the link between the seeds and the illness had not been definitively established, he called on French retailers to pull the company’s seeds for fenugreek, mustard and arugula from shelves.

Efforts to contact Thompson Morgan on Friday were not successful. The company also distributes seeds in the United States. The German outbreak began in early May and has sickened more than 3,800 people, nearly 900 of them with a serious complication involving acute kidney failure. Nearly all the cases involved people who lived or had traveled in Germany.

German authorities have blamed the outbreak on bean sprouts grown by a German commercial sprouter, which shut down on June 5. American health experts said the French outbreak was worrisome because it suggested that the ultimate source of the deadly bacteria — a rare and highly virulent E. coli strain known as O104:H4 — had not been found and contained.

“If there’s no linear connection from the first outbreak, then the simplest and the most ominous explanation is there’s an upstream source and that’s very concerning because that stuff could still be being distributed,” said Dr. Phillip Tarr, a professor of microbiology at the Washington University School of Medicine in St. Louis.

Dr. Tarr said it was still too early to draw firm conclusions about the cause of the latest round of illnesses. He said it was possible, although unlikely, that someone sickened in the earlier outbreak had prepared food served at the event in France and so passed on the infection.

“Traceback here is absolutely critical because that killer organism could be sitting around viable and not contained,” he said.

William E. Keene, a senior epidemiologist at the Oregon Public Health Division, said it was urgent to find out if the seeds used by the German grower had come from the same source as the seeds linked to the French cases.

At least five of the French cases involved kidney failure, and tests on two of those people showed they were infected with the O104:H4 strain. The eight people infected in the Bègles area were adults, age 31 to 78. In addition, two children were sickened in another town and they were presumed also to have E. coli infections, although it was not clear if they had the same strain.

Article source: http://feeds.nytimes.com/click.phdo?i=76f07ff2988ff0b8ebf60ec7c866987b

Filed Under: Business News Tagged With: , ,