Finmeccanica to review management powers

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Italian defence group Finmeccanica said it will convene a board meeting next week as it grapples with a widening corruption probe that has reached top executives and put pressure on its chairman to resign.

The state-controlled group said the board meeting on Dec. 1 would review board powers attributed at the May 4 shareholder assembly which appointed the current board.

Behind the terse statement is a boardroom battle over the future of Pierfrancesco Guarguaglini, the group’s 74 year-old chairman, who is under investigation over alleged false invoices and illicit funding of political parties, Reuters reports.

Italy’s Treasury is Finmeccanica’s leading shareholder with a 32 percent stake and the corruption scandal has grown into the first big test for Prime Minister Mario Monti’s new technocrat government, which was sworn in last week.

In a sign of wavering political support, Industry Minister Corrado Passera refused to express backing for Guarguaglini, who has denied any wrongdoing and refuses to resign.
“I have an opinion, but no comment,” Passera told reporters in Brussels, where he was attending a meeting of European Union ministers.

Next Thursday’s board meeting follows an earlier meeting on Nov. 14 at which the board signed off on a plan to sell 1 billion euros ($1.33 billion) of assets to cut debt.

Guarguaglini, who would normally have chaired the meeting, did not attend, prompting media speculation of a split with chief executive Giuseppe Orsi, who took over as CEO in May.

Pressure on Guarguaglini to step down has intensified since Monti issued a statement on Tuesday saying he expected “a rapid and responsible solution” to the standoff and that ministers would ensure the necessary steps were taken.

The move comes after Finmeccanica board member Dario Galli said on Wednesday a board meeting would soon take appropriate measures when asked if Guarguaglini would go.
“ONLY A QUIP”

Guarguaglini, a veteran manager of state-owned companies, was appointed chairman and chief executive of Finmeccanica, Italy’s second-biggest industrial group after Fiat, in 2002.

But last May the CEO job was handed to Orsi and the two are known to be at odds over how to turn around the loss-making group, which has 75,000 workers worldwide and at one stage was in the frame to sell helicopters to the U.S. administration.

Guarguaglini, under investigation in the probe that centres on accusations of false invoices and slush funds allegedly used to bribe politicians, told an Italian daily on Thursday Monti’s comment was “only a quip” and that he would not resign.
“(Monti’s chief of staff Antonio) Catricala did not ask me to resign and nobody in the government is pressuring me in this respect,” Guarguaglini was quoted as saying in Il Fatto Quotidiano newspaper.

Several Italian newspapers reported on Thursday that Finmeccanica’s board would meet at the latest by next week to take away the chairman’s operational powers.
“He’s out,” la Repubblica wrote, quoting government sources.

Guarguaglini’s wife, Marina Grossi, who is chief executive of Finmeccanica subsidiary Selex Sistemi Integrati, is also under investigation as part of the probe.

Both deny any wrongdoing.

Guarguaglini said in a statement on Tuesday he had “never created illegal funds nor has he ever paid or ordered anyone to pay money to politicians or political parties.”

He told Il Fatto Quotidiano he had been notified in July that Rome prosecutor Paolo Ielo was investigating him.

At the weekend, Guarguaglini’s right-hand man, Lorenzo Borgogni, stepped aside after being put under investigation.

Earlier this month, Guarguaglini did not chair the board meeting that signed off Finmeccanica’s nine-month results, which showed a net loss due to writedowns and sent its shares down 20 percent.



Shares in Finmeccanica closed up 2 percent, outperforming a flat Italian blue-chip FTSE MIB stock index.