Former Saipem Executive Detained in Corruption Probe

By Manuela Mesco

MILAN--Pietro Varone, a former senior executive of Italian oil company Saipem (SPM.MI), was put under preventive detention in late July as part of an investigation involving Saipem, Italian tax police said Tuesday.

The measure is the latest development into a probe against Saipem, Italy's biggest oil-service company by market value, which started last year.

Mr. Varone, former chief operating officer of Saipem's engineering and construction business unit, denies any wrong-doing. He was put under detention for allegedly having had a role in bribery activities on behalf of Saipem, allegedly aimed at winning contracts in Algeria, although no formal accusation has been made yet as the investigation is still ongoing, one of his lawyers said Tuesday. He added that lawyers will ask to convert the measure into house detention.

Saipem said Tuesday that it wouldn't comment on Mr. Varone's detention as he's no longer with the company. Mr. Varone was in fact suspended last December, as he emerged as a possible suspect in the corruption probe.

The Italian oil company, partially controlled by Eni (E) with a 43% stake, said in December it was being investigated by Italian prosecutors over possible corruption involving some Algerian contracts. Last month it completed an internal investigation that found no evidence of illegal payments to Algerian officials, although it discovered violations of internal procedures. Milan prosecutors haven't formalized any of their allegations as investigations are still ongoing.

The probe in Milan is an offshoot of inquiries by Algeria into its oil industry, which led to the departure of the top management of state-owned oil giant Sonatrach (SON.YY) in 2010. The biggest Saipem contract scrutinized in the Algerian inquiries was to build the GK3 gas pipeline and was worth $580 million, people familiar with the matter have previously said. Saipem won the contract in northeast Algeria in 2009.

Algerian Energy Minister Youcef Yousfi has previously said Saipem could be blacklisted from state-oil contracts if found guilty of corruption. But a Sonatrach official said it was still allowed to bid for deals for now because the investigations are ongoing.

The company has been frequently under the spotlight for alleged bribery in recent months. In July, a court in Milan has fined Saipem 600,000 euros ($780,000) and ordered the confiscation of EUR24.5 million of assets after it was found guilty of corruption in Nigeria.

(Benoit Faucon in London contributed to this article.)

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