In February 2013, Finmeccanica CEO Guiseppe Orsi was arrested and AgustaWestland CEO Bruno Spagnolini was placed under house arrest in connection with suspected bribes paid to secure the sale of 12 AgustaWestland AW101 helicopters to the Indian government in 2010. This week, India’s Ministry of Defence issued a termination notice for the contract on the basis of a breach of integrity, although it indicated a willingness to take part in an arbitration process. In response, AgustaWestland issued the following statement on Jan. 2, 2014.
AgustaWestland, a Finmeccanica company, confirms to have received yesterday from India’s Ministry of Defence a notification concerning the appointment of an arbitrator from its side, as requested by AgustaWestland on November 25 and December 4, 2013, as well as a termination notice of the agreement for the supply of 12 VVIP/VIP helicopters, consistent with yesterday’s press announcement by the Indian Ministry of Defence.
AgustaWestland still finds that neither the termination notice by the Ministry of Defence nor the show cause notice, from which this termination notice stems, offers adequate basis to take any action against the Company. It is the Ministry of Defence’s admitted position (PIB release of MoD statement February 14, 2013) that the tender process has been duly followed. Accordingly, the termination notice received yesterday will have to be discussed within the framework of a fair arbitration process. To this end, AgustaWestland will soon propose the names of the persons for the purpose of selecting the third arbitrator by agreement of the parties, as requested by the Indian Ministry of Defence.
AgustaWestland remains committed to working with the Government of India to resolve the issues, to allow the Indian armed forces to receive the equipment they need and is ready to perform the remaining obligations under the agreement for the supply of the 12 VVIP/VIP helicopters. AgustaWestland will continue to support the three helicopters already delivered to and currently operated by the Indian Air Force.
Finmeccanica has already introduced stringent ethical procedures common to all Group companies that have harmonized their systems of rules based on the standards set by the parent company. These processes are reviewed regularly and have been further strengthened in correspondence with the most stringent international ethical standards. Also AgustaWestland applies the same strict procedures to prevent corruption in accordance with the updated Finmeccanica policies.
In any case, AgustaWestland is ready to take the necessary actions, on top of the above mentioned arbitration measures, included in a mitigation plan already prepared. This plan includes a reduction to the workforce to readdress the company business model and the reallocation of existing working capital that will be reflected also on the supply chain. The completion of this plan, the positive company performance and the recent order intake will ensure a solid platform for revenues and cash flow streams.
