Image source,Guardia di Finanza
This Italian company designs and manufactures military drones, as well as aircraft and space vehicles.
Italian police said on Thursday (September 2) that they had searched a local military drone company that they believed was acquired by a Chinese state-owned company and transferred important technology to China.
The company’s three Italian and three Chinese managers are under investigation. They are suspected of violating Italian weapons laws and laws restricting the sale of strategic assets to foreign countries.
The company, headquartered in northeastern Italy, has not been named, but according to the police, its business includes the provision of military drones for NATO leaders and also has a contract with the Italian Ministry of Defense.
The Italian company involved denies the allegations and emphasizes the transparency of the relevant acquisition transactions.
High-priced acquisitions of Hong Kong companies raise suspicion
The prosecutors in the province of Pordenone in Italy found that in 2018, a Hong Kong-registered company acquired a 75% stake in the drone company at a price 90 times the market value.
At that time, the market price of this part of the equity was about 45,000 euros, but the estimated value of the acquisition was close to 4 million euros.
Investigators pointed out that this Hong Kong-registered company is actually using a complex and opaque corporate holding network to cover up its true identity. The real buyers behind the acquisition are two Chinese state-owned companies.
Italy’s financial crime investigation department suspects that the transaction violated Italy’s “golden power” regulations, which prevent or restrict the sale of strategic assets to foreign investors.
The law covers the sale of assets such as defense, national security, and infrastructure, and this company in the province of Pordenone needs to undergo special inspections because it is a supplier to the Italian military. In addition to drones, the company also manufactures airplanes and spacecraft.
Six executives of the company-three Chinese and three Italians-have been reported to the prosecutors for being involved in the sale.
The Italian authorities stated that the company did not notify the relevant transaction in accordance with the law, and this acquisition is not a pure investment transaction, but the relevant company hopes to obtain technology including military use and transfer the technology to China. The company is transferring drone production to Wuxi, an east China city about 135 kilometers west of Shanghai.
According to Italian police information, this company has Chinese and Italian teams operating in the two countries respectively. Among them, a military drone was exported to a trade fair in Shanghai, China in 2019. At that time, the company described it as one in the documents submitted to the Italian customs. A radio-controlled model aircraft, the authorities alleged that the company had not made a correct statement at the time.
The company’s lawyers denied that the acquisition violated any Italian law — it did not transfer strategic technology assets out of Italy, nor did it violate the “golden power” regulations. They stated that the acquisition was transparent in terms of the company’s value and taxation.
The Italian company’s team of lawyers stated that they were shocked by the disclosure of the acquisition and accused the tax police of prematurely releasing the details in an inappropriate manner.
The Italian National Press Agency (Ansa) reported that the drone manufacturer has been suspected of violating arms embargo regulations for selling drones to Iran and is under investigation by tax police. The company said earlier this year that it will prove that its operations are legal.