Finmeccanica CEO Giuseppe Orsi is under investigation in a case involving the payment of bribes in the US$670-million sale of 12 helicopters to the government of India.
Prosecutors in Busto Arsizio, north of Milan, ordered a search of Orsi's home, as well as the headquarters of Finmeccanica's AgustaWestland helicopter division.
AgustaWestland recently made headlines in Ontario when a legislative committee probing financial irregularities at Ornge learned of a controversial payment agreement with the Italian firm.
The committee heard that Ornge purchased 12 helicopters from Agusta for C$144 million, only to almost immediately pay $6.7 million in upgrade fees that were not approved by the board.
The committee also heard that Agusta paid an Ornge spinoff company $6.7 million after it reached a deal on the helicopters, which included a $4.7-million agreement for marketing services.
Ousted Ornge chief executive Chris Mazza said the extra fees were not part of a kickback scheme, and Agusta has vehemently denied any wrongdoing.
Italian authorities also ordered the house arrest of AgustaWestland chief Bruno Spagnolini as part of Tuesday's descent on Finmeccanica.
Orsi has denied any wrongdoing, and Finmeccanica and AgustaWestland both issued statements supporting the executives and calling the measures "precautionary." Finmeccanica said operations at the company would continue normally.
The arrests for alleged corruption gave fuel to an already incendiary election campaign, with some candidates blaming Mario Monti's technical government for not having done enough to shore up management at the company, which is 30 per cent state-owned and Italy's second-largest industrial concern.
Monti is currently leading a centrist movement in his campaign for a second term.
Monti, whose technical government has wrestled with the Finmeccanica case and pressured Orsi's predecessor to resign due to other allegations, said the governance issues at the aerospace company would be dealt with "as soon as possible."
In a statement, the Treasury Ministry said internal reviews of the company's procedures had revealed no irregularities, and Orsi himself had denied any wrongdoing. "In the absence of factual findings," the ministry said.
Prosecutors allege that bribery was part of the "company philosophy," according to the Italian news agencies that obtained copies of the arrest warrant. Prosecutors also allege Orsi tried to interfere with the investigation.
Orsi's lawyer, Ennio Amodio, told reporters that the arrest orders were "devastating because it decapitates two of the largest companies in our country," Italian news agencies quoted him as saying.
Meanwhile, in India, the country's Defence Minister has ordered a separate investigation. The ministry, in a statement, said that the deal included provisions against bribery and "the use of undo influence."
Finmeccanica and its executives have been the target of a wide-ranging, years-long investigation into alleged corruption in the awarding of international contracts. In 2011, Orsi took the helm of Finmeccanica when the previous chairman and CEO, Pier Francesco Guarguaglini, was also implicated in the bribery investigation.
Guarguaglini and his wife, who ran a subsidiary, are accused of setting up slush funds to funnel money to political parties.
— With files from The Canadian Press.Suggest a correction