* Finmeccanica promotes insider Pansa after CEO arrested
* India suspends $750 million deal over bribe claims
* Corruption taint could hurt Finmeccanica's overseas sales
(Adds comments from Indian named in Italian warrant)
By Keith Weir and Manoj Kumar
MILAN/NEW DELHI, Feb 14 The new head of Italian
defence group Finmeccanica has inherited a corruption
crisis over a $750 million helicopter deal with India that risks
hurting the company's business in other foreign markets.
India's defence ministry confirmed on Thursday that it had
suspended payments following allegations that Finmeccanica paid
bribes to swing the deal for the sale of 12 luxury helicopters.
Finmeccanica promoted company insider Alessandro Pansa to
the top job at a hastily convened board meeting on Wednesday
night. Police in northern Italy arrested CEO and Chairman
Giuseppe Orsi the previous day.
Orsi, who is being held in jail but has not been charged,
faces allegations of paying bribes to win a 560-million-euro
($750-million) contract for the company's AgustaWestland unit to
supply helicopters for use by senior Indian politicians.
He denies any wrongdoing and will be questioned on Friday.
Finmeccanica shares fell 1.7 percent on Thursday and have
lost 12 percent in the aftermath of Orsi's arrest.
Concerns over the potential long-term damage to sales around
the world from the taint of corruption claims outweighed relief
at swift action to fill the management vacuum.
"The speed at which the company tried to fix the corporate
governance issues is a positive," Italian bank Mediobanca said.
"We still see reputational risk and we wonder if some other
countries may try to cancel orders," it said.
India, the world's largest weapons importer, has threatened
to scrap the deal and blacklist Italy if bribery allegations are
proven. It will not take delivery of the remaining nine
helicopters until a probe by its Central Bureau of Investigation
(CBI) is complete.
Finmeccanica unit Alenia Aermacchi is hoping to bid for a
contract to supply over 50 military transport aircraft to India
in competition with European aerospace group EADS.
In India, where national elections are due next year, the
opposition Bharatiya Janata Party (BJP) lambasted the
Congress-led government for not acting sooner over the
An internal defence ministry investigation last year found
no foul play in the purchase of the helicopters, destined for
use by India's political elite.
Critics say the government did too little to follow up later
media disclosures that the Italian investigation linked India's
former air chief S.P. "Shashi" Tyagi and three of his cousins to
the alleged bribery. Tyagi denies any wrongdoing.
On Thursday, one of the cousins, Sanjeev "July" Tyagi,
denied allegations in the Italian arrest warrant that he had
taken 100,000 euros in cash bribes and introduced company
representatives to the air chief on several occasions to discuss
the helicopter deal.
"I have nothing to do with this, they are lying," he told
CNN-IBN television, adding he and his brothers were consultants
to the power industry. "Never, ever in the defence sector."
ITALIAN STATE ROLE
In Italy, elections are only just over a week away and all
sides are trying to make political capital from the latest in a
series of corruption cases to shake the Italian business world.
Former Prime Minister Silvio Berlusconi, who has fought a
series of legal battles himself over his business empire and
private life, has said that overzealous prosecutors risked
harming Italian business.
The Italian state remains the largest shareholder in
Finmeccanica with a stake of about 30 percent.
Centre-left leader Pier Luigi Bersani, whose group was ahead
in the last opinion polls published before the Feb. 24-25
election, said on Thursday it was the wrong moment to consider
"In this moment it would be crazy... I am talking about Eni,
Enel, about Finmeccanica," Bersani said when asked about
potential privatisations in a television interview, referring to
oil giant Eni and utilities group Enel.
Ratings agency Moody's confirmed its rating of Finmeccanica
debt after Pansa's appointment but cut the outlook to negative
"The negative outlook reflects heightened challenges in
achieving a stronger operating and financial profile that is
consistent with expectations for the Baa3 rating," it said.
Moody's cited a soft outlook for defence spending and the
need for Finmeccanica to sell off more assets.
Pansa, who joined the company in 2001 as chief financial
officer, will be supported by Guido Venturoni, 78, a former
admiral who becomes vice chairman and who was the senior
independent director on the Finmeccanica board.
Shareholder meetings will be held in April to finalise the
new board which is when a new chairman could be appointed to
work alongside Pansa.
The heavily indebted group is trying to sell units including
its AnsaldoEnergia power engineering business to focus on its
core aerospace and defence activities.
(Additional reporting by Danilo Masoni and Antonella Ciancio in
Milan, and Satarupa Bhattacharjya and Jo Winterbottom in Delhi;
Editing by Louise Ireland and Sophie Walker)