Econostrum | Economic News in the Mediterranean

Italy's Saipem fined €192m for corruption in Algeria

Written by Frédéric Dubessy on Wednesday, February 16th 2022 à 15:52 | Read 2007 times

The corruption case concerns the construction of a gas liquefaction plant in Arzew (photo: DR)
The corruption case concerns the construction of a gas liquefaction plant in Arzew (photo: DR)
ITALY / ALGERIA. Saipem, an Italian company specialising in oil exploration and drilling, was sentenced on Monday 14 February 2022 by the court of Sidi M'Hamed (Algiers) to a fine of €192 million for acts of corruption. More precisely, it was found to have "obtained a contract, with a price higher than the expected value, concluded with a state-owned commercial and industrial company, by benefiting from the influence of representatives of this company" as well as having produced "false customs declarations", as indicated in the judgment.

Two of its senior executives, Gilbert Bulato and Massimo Gallipoli Steal, were sentenced to six years in prison each and fined one million dinars (€6,261).

For the same offences, Chakib Khelil, former Algerian Minister of Energy, was sentenced in absentia to 20 years in prison and a fine of two million dinars (€12,520). He was on the run in the United States and was the subject of an international arrest warrant issued in August 2019. A previous one was issued in August 2013 for "corruption, money laundering, conclusion of contracts contrary to regulations, abuse of power and constitution of organised criminal gangs" after the results of an investigation into the payment of commissions by a subsidiary of Italy's ENI to obtain contracts in Algeria. But it was cancelled by President Abdelaziz Bouteflika, his childhood friend.

Mohamed Meziane, former CEO of Sonatrach, already imprisoned in another case, was sentenced to five years and a million-dinar fine. Other executives of the oil company, which is 100% owned by the Algerian state, were also pinned down by the judges, including its vice-president Abdelhafidh Feghouli, who will have to spend six years in jail and pay a million-dinar fine.

A company in great difficulty

The Algerian justice system accuses them of having favoured Saipem, in 2008, in the award of a contract for the construction of the Arzew gas complex, near Oran in the west of the country, and more particularly the construction of a gas liquefaction plant (LNG3). In addition to corruption, they were found guilty of "granting undue privileges", "abuse of office" and "concluding contracts in violation of laws and regulations".

Already in September 2018, the Milan court had sentenced Pietro Tali, former CEO of Saipem (he resigned in December 2012), to four years and nine months in prison, and his company to a €197m fine, the value of the bribes paid to several Algerian officials to obtain contracts in the gas sector worth €9bn.

In a press release published on Tuesday 15 February 2022, its new directors indicate that "Saipem Contracting Algeria and Snamprogetti SpA Algeria Branch will appeal against the sentence of the Algiers Court, with the consequent suspension of the effects of the same decision". They also specify that the Italian justice has "completely acquitted the company on 14 December 2020", on the same case of the LNG3 project of Arzew.

Saipem has decided to set aside €192 million to cover this new fine pronounced by the Sidi M'Hamed court. It will therefore not be paid immediately.

The company, which had a turnover of €6.92 billion in 2021 and losses of €1.84 billion, is in serious financial difficulties and short of cash. At the end of January 2022, it announced a loss of more than a third of the company's equity for 2021. Its share price has already fallen by 38% since the beginning of 2022 and Saipem is in the middle of drafting a new strategic plan for the years 2022-2025 (after the one presented on 28 October 2021 before being withdrawn). It will be proposed on 15 March 2022 by CEO Francesco Caio and his new managing director, Alessandro Puliti - in office since 7 February 2022 - to their board of directors. The engineering company, owned by energy group Eni and Cassa Depositi e Prestiti (CDP), is also expected to discuss a capital increase, debt restructuring and even asset sales.


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