Aerospace giant’s convict CEO could pose menace to firm’s IPO plans

A politically billed standoff above an Italian aerospace giant’s convicted fraudster CEO is now threatening to strike America’s shores.

Leonardo SpA — a significant defense contractor that sells all the things from missiles to cybersecurity companies — is contemplating a stock listing for its US subsidiary, Leonardo DRS, which does business enterprise with the Pentagon.

The IPO talks arrive as the firm arrives less than fire in Italy since its CEO, Alessandro Profumo, is staring down a 6-12 months jail sentence and resisting calls to move down as he appeals the verdict.

The politically linked Profumo, who’s reportedly attained the nickname “Mr. Arrogance” for his aggressive design, was convicted in an Italian courtroom in Oct of false accounting and sector manipulation for his part in an accounting scheme at a separate organization.

But Leonardo has stood by him, arguing that the 63-12 months-previous CEO’s conviction is not closing and “entirely unrelated” to his recent employer.

“Therefore, as much as Mr. Profumo’s lawful issues are relevant, we can reiterate that the Leonardo board reaffirmed their assurance in Mr. Profumo’s leadership last Oct and this will have no affect on his ongoing potential to direct the group,” the Rome-centered organization advised The Publish in a statement.

Leonardo — the world’s 11th-major arms service provider with about $11 billion in weapons income previous calendar year, according to the Stockholm International Peace Investigate Institute — is also looking for to grow its US enterprise, in accordance to Reuters, which described past thirty day period that the Italian guardian intends to sustain manage of DRS, the unit exploring a US listing.

DRS — which Leonardo acquired in 2008 — by now would make up a large chunk of the Italian parent’s enterprise, with about 1.7 billion euros (approximately $2.1 billion) in profits for the to start with nine months of the calendar year, accounting for some 19 % of Leonardo’s whole.

The US Office of Defense has been requested to weigh in, but has nevertheless to react, in accordance to Giuseppe Bivona, a lover at London-dependent hedge fund Bluebell Funds Associates, who wrote to the Pentagon on Oct. 27.

“If the CEO of a US detailed firm was sentenced to jail, his/her resignation (pending charm) would be immediate and irrevocable,” Bivona’s letter examine.

“There is a reputational challenge, [a] suitability difficulty,” Bivona informed The Put up. “If your principal client is the US Division of Defense … I can tell you that they’re likely to select up the cellular phone and inquire you, ‘What the hell is likely on?’”

Bivona — who served uncover the fraud Profumo allegedly committed at Banca Monte dei Paschi di Siena, an Italian state-owned bank — said he has not read back again from the Pentagon, which also did not reply to The Post’s request for comment.

Bivona — who is advising an institutional fund which is suing Monte dei Paschi di Siena — promises Profumo is being secured by his ties to Italy’s Democratic Party, a plank of the coalition govt that controls the Ministry of Overall economy and Finance, which is also Leonardo’s largest shareholder.

But pressure also seems to be mounting in Italy exactly where Profumo has also been blasted by lawmakers on the two sides of Italy’s parliament. The ruling 5 Star Movement celebration urged him to step down shortly right after he was convicted, even though Matteo Salvini, head of the opposition League celebration, has mentioned he could weaken Leonardo’s small business.

“It is challenging to choose property orders from throughout the earth with a taking care of director sentenced to 6 years,” Salvini explained in a Dec. 10 speech.

Profumo joined Leonardo in 2017 right after a banking career that landed him at Italian lender Monte dei Paschi di Siena, where by he was chairman. He created a popularity as an intense dealmaker, reportedly earning the nickname “Mr. Arrogance” together the way.

US industry experts say the Leonardo scandal has the potential to develop bumps in the protection contractor’s road to a US listing.

“I’d be shocked if any self-respecting expenditure financial institution would partner with them and acquire them public pending this condition of affairs,” Shivaram Rajgopal, an accounting and auditing professor at Columbia Business University, advised The Publish.

Profumo’s conviction would not legally bar Leonardo DRS from going community in the US, but the enterprise would pretty likely have to disclose the scenario in its filings with the Securities and Trade Fee, a disclosure that could raise eyebrows amid investors.

“Even if he’s a fantastic guy and all that, if he’s out of pocket and is set in jail and the corporation depends upon him, that’s a really significant hazard aspect,” mentioned Francis Curran, a securities litigation lawyer at Manhattan regulation company Kudman Trachten & Aloe.