More bad news comes from Italy, as MV Agusta has come under investigation by the Guardia di Finanza for allegedly misusing its employees’ INPS contributions (Italy’s national pension system, similar to the USA’s Social Security system), which may have gone to paying bills from suppliers, to the tune of €6.8 million.
To put this into context for our American readers, Italy’s Guardia di Finanza is law enforcement agency that handles financial crimes – its duties and powers are analogous to the intersection on a Venn diagram that is composed of our IRS, FTC, and US Customs bureaus.
Italian businesses are required to pay into the INPS pensions of their employees, and here the Guardia di Finanza has been investigating whether MV Agusta used those funds instead to pay its supplier invoices. MV Agusta CEO Giovanni Castiglioni denies the allegations, though has some financial issues of his own to contend with.
According to a report in Varese News, the Guardia di Finanza has found that MV Agusta failed to contribute to the pensions of its employees between the years 2013 and 2015, despite withholding the pension payments from its employees’ paychecks.
Digging into the books, the Guardia di Finanza alleges that the amount owed to the pensions was at one point as high as €13 million, though some of that amount has since been paid back. Varesini Deputy Prosecutor Luca Petrucci says that MV Agusta still has a balance of nearly €7 million to pay back into the INPS accounts.
It is speculated that these pension withholdings were used to pay money owed to parts suppliers, who would no longer supply parts on credit to MV Agusta, effectively making the employee pension fund like a revolving line of credit for the motorcycle company.
Responding to the investigation made by the Guardia di Finanza, MV Agusta released a terse statement, which said that 1) the company has always complied with tax law and benefit obligations, which can seen in its financial records, 2) that MV Agusta is paying regular tax and social security deductions, as agreed to by the institutions, and 3) as part of its debt restructuring, the tax and social security obligations are subject to renegotiation and rescheduling, to the extent that the law permits.
The legality of the missing pension payments will likely have to be sorted out by the courts, but the bad news doesn’t end there for MV Agusta. Giovanni Castiglioni himself has also come under investigation for money issues, with authorities taking an interest in some irregularities found on his tax return.
As such, the ANSA reports that Italian authorities seized two Ferrari cars from Castilioni last July, valued at €180,000. Meanwhile, rumors out of Italy suggest that Castilioni’s efforts to replace AMG have failed, with the CEO unable to secure new investors in his troubled motorcycle company.
It is suggested that the MV Agusta’s financial situation, both publicly and privately in its accounts, are the reason for a lack of enthusiasm from new investors.
This leaves MV Agusta in a precarious position going forward, especially with its financial renegotiations in the courts, concerning the €50 million it owes suppliers.
Our sources tell us that two-thirds of MV Agusta’s suppliers will have to agree to the court’s proposed restructuring of the debt, which would be a 30% to 40% reduction under MV Agusta’s proposed plan. Several key part vendors have already stopped working with MV Agusta, while others have switch to payment up-front only deals.