Please ensure Javascript is enabled for purposes of website accessibility

Bribery Scandal Could Leave India's President Stranded on the Tarmac

By Rich Smith - Jan 4, 2014 at 3:59PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

An Italian defense contractor beat out an American to build India's new "Marine One" -- but had to pay bribes to do it. And now, India says it won't "stay bought."

In America, we call it "Marine One" -- the one particular helicopter, from a fleet of specially designed, special-order helos, tasked with ferrying President Obama on short, less-than-airplane-length flights.

In India, they don't call it "Marine One." Instead, they call it a scandal.

Think President Obama could give Indian President Pranab Mukherjee a lift on Marine One? Source: Wikimedia Commons

Earlier this year, as you may recall, India was rocked by scandal. It was alleged that certain officials, responsible for awarding a $753 million contract to buy "Very VIP" helicopters for the nation's political elite, had taken bribes from a subsidiary of Italian contract winner Finmeccanica SpA (FINMY -0.22%).

In February, the scandal cost Finmeccanica CEO Giuseppe Orsi his job, and landed him in the slammer to boot. On Wednesday, it also cost Finmeccanica the contract. Arguing that by bribing its officials Finmeccanica had breached an "integrity pact," India's Ministry of Defense terminated the contract to buy a dozen of Finmeccanica's EH101 helicopters "with immediate effect."

The MoD says it's willing to consider arbitrating the dispute with Finmeccanica, which has already delivered three of the 12 helicopters it was asked to produce. But with the contract now officially canceled, it's hard to see what's left to arbitrate -- other than how much money, if any, India might still owe Finmeccanica.

Finmeccanica's EH101 -- grounded for good? Source: Wikimedia Commons

What you need to know
Also unclear -- but in a good way -- is what India's decision might mean for America's defense contractors. It's been more than five years since a U.S. company -- United Technologies' (RTX -1.12%) subsidiary Sikorsky -- was thought to have a chance of winning the Indian helo contract. That hope ended in 2008, when India rejected Sikorsky's entry, an S-92 transport, saying the aircraft failed to meet certain essential "engine and technical specifications."

If it turns out that Finmeccanica won those specs by paying bribes, however, this could permit Sikorsky to resubmit its bid -- and potentially win the Indian contract.

Sikorsky would have a good chance of winning, too, in the event of a resubmission. Already, the United Technologies' subsidiary has taken the lead in the contest to build President Obama's new fleet of "Marine One" helicopters. In cooperation with partner Lockheed Martin (LMT 0.49%), Sikorsky is expected to win America's "VXX" helicopter competition to build the U.S. President's new ride.

If and when that happens, it would lend further strength to a Sikorsky bid to build presidential helos for India... and maybe for other countries' presidents after that.

Fool contributor Rich Smith has no position in any stocks mentioned. The Motley Fool owns shares of Lockheed Martin. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Lockheed Martin Corporation Stock Quote
Lockheed Martin Corporation
$440.16 (0.49%) $2.15
Raytheon Technologies Corporation Stock Quote
Raytheon Technologies Corporation
$95.05 (-1.12%) $-1.08
Leonardo S.p.a. Stock Quote
Leonardo S.p.a.
$4.54 (-0.22%) $0.01

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/17/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.