The Group became involved in the solid urban waste disposal projects in the Province of Naples and other provinces in Campania at the end of the 1990s through its subsidiaries FIBE and FIBE Campania.
The main phases of the USW Campania projects were as follows:
- the "Contractual" phase which started in the 2000-2001 period with the signing, by the two project companies FIBE and FIBE Campania, of the service contracts for the disposal of urban waste in the provinces of Campania and ended on December 15, 2005 with the cancellation "by power of law" of these contracts pursuant to Decree Law No. 245/2005 (converted into Law No. 21 of January 27, 2006);
- the “Transitional” phase which started upon conclusion of the Contractual phase and lasted until the enactment of Decree Law No. 90 of May 23, 2008 and Decree Law No. 107 of June 17, 2008, both converted into Law no. 123 of July 14, 2008. The latter measure officially marked, among other things, Impregilo Group’s exit from the waste disposal business, by transferring the title to the RDF facilities to the Provincial Administrations; and
- the "post-transitional" phase which, launched at the end of the "Transition "phase and to date is still underway, is defined more concisely as the "Current" phase.
On the reporting date of this Interim financial report, the financial position of the Group regarding the USW Campania Projects was concentrated mainly in the components of working capital, consisting of the net receivables due to FIBE in connection with the Contractual and Transitional phases amounting to € 106 million at September 30, 2014.
At the same time, the major problems that, since 1999-2000, have characterized the Company’s activities within the service contracts and that have been discussed in detail and reviewed in all of the financial reports published by the Group starting from that period, have evolved and became more complex over the years, giving rise to a large range of disputes, some of which major and in part still ongoing, in spite of the positive developments in recent years. The general situation in terms of pending litigation is still particularly complex. A brief overview is provided below, especially in relation to the existing risk positions.
Since FIBE Campania S.p.A. was incorporated into FIBE S.p.A. in 2009, in the rest of this chapter, unless otherwise stated, reference is made exclusively to FIBE S.p.A., even with regard to positions and events that affected the company dissolved through the merger.
Recovery of the amounts owed to FIBE by local administrations for waste disposal fees up to the date of termination of the contracts
The ad acta Commissioner appointed by the Regional Administrative Court to recover the receivables owed to the former contractors by local administrations in Campania for the waste disposal services provided until December 15, 2005, after filing an initial report in August 2009, submitted a second report in June 2013, based on a more detailed investigation and assessment of the above-mentioned receivables through subsequent adversarial audits of the accounting records and documents submitted by the parties, which while containing a review of the receivables owed to FIBE for the activities performed pursuant to contract, submitted to the Regional Administrative Court the issue of the offsets claimed by the Administration for the relevant jurisdictional considerations and the respective decisions. With order no. 8889/2014 the Regional Administrative Court held that the claims could not be offset (due to the fact that they were subject to other pending disputes) and adjourned the hearing to November 16, 2014, for the Commissioner to complete the assignment.
Request that FIBE take back ownership of certain areas and storage sites by the parties appointed by the Government Commissioner to handle technical and operating activities
Starting in 2008, FIBE had to deal with a number of repeated events where the parties appointed by the Government Commissioner to handle technical and operating activities demanded that FIBE take back ownership of certain areas and storage sites acquired by the appointed parties in August 2008, since they were deemed not to be suitable for the management of the service. The Regional Administrative Court of Lazio and the Council of State, following the appeals by FIBE, confirmed the operability of the assets in question. The civil proceedings before the Court of Naples initiated by S.A.P.NA. S.p.A., a local company set up by the Naples provincial authorities, are part of this situation. S.A.P.NA. S.p.A challenged its takeover of title to certain temporary and definitive areas and stocking sites in roughly 40 proceedings. It also requested to be reimbursed and held harmless by FIBE S.p.A. and/or the government commissioner from the operating costs incurred in the meantime and yet to be incurred, including possible site reclamation. FIBE S.p.A. responded in each of these proceedings, which are still in progress.
Administrative procedures for the recording and recognition of the costs for activities carried out and the work ordered by the Administration during the transitional management period
As early as 2009 FIBE filed a complaint with the Regional Administrative Court of Lazio regarding the slowness by the Administration in completing the administrative procedures for the recording and recognition of the costs incurred by the former service contractors for activities carried out pursuant to law and the work ordered by the Administration and performed by the companies during the transitional management period.
Through a number of appeals made to the Regional Administrative Court, FIBE:
- proposed an initiative for the issue of the necessary declaration and satisfaction orders against the local public authorities, also on an admonitory basis. The admonitory motion was denied, as the Regional Administrative Court did not find that there was a justification for issuing a payment injunction. The merit hearing is currently pending;
- a preliminary motion for the appointment of a court-appointed expert who, after examining the documentation presented, would identify the amount due to the administration during the transitional management period.
The Regional Administrative Court ordered an audit of the accounting documents submitted for reporting purposes, in order to ascertain whether the claims lodged in the proceedings are grounded, reserving its merit decision until completion of the procedure. The questions posed in the ruling were submitted to the auditor, which was identified by the Court as La Sapienza Rome University. A partial expert’s report covering the period from December 15, 2005 to December 31, 2006 was filed on January 29, 2013, followed by a final report dated March 31, 2014, in which, essentially, the auditor, in providing comprehensive answers to the queries of the Regional Administrative Court, analyzed the amounts listed by FIBE in its appeal and the corresponding supporting documents, finding substantial consistency between them. In addition, the auditor left the Regional Administrative Court to decide the judicial validity of the documents submitted by FIBE, which provide evidence of the work ordered and, lastly, did not render an opinion (because it had not been requested) regarding the amounts reported but not subject to review by the Commissioner’s entities in charge at the time. To review these entries, the Regional Administrative Court will need to raise new specific questions. The appeal remains pending, while awaiting a hearing date to be set.
Delivery of waste to the Acerra waste-to-energy plant
With their appeal notified on May 18, 2009 (RG No. 4189/09), the companies challenged Prime Minister’s Order No. 3748/09 before the Regional Administrative Court of Lazio whereby only waste produced and stored after the date of termination of the service contracts with the companies (December 15, 2005) was to be delivered to the Acerra waste-to-energy plant. A date for the related hearing is yet to be set. While they are convinced that the obligation to dispose of all of the bales produced and stored in the Campania region (regardless of the solution selected by the Public Administration as to which waste was to be disposed of first and which one later) rests solely with the Administration, the Companies challenged this order before the Regional Administrative Court of Lazio – Rome as a precaution.
Payment of the RDF plants
The Regional Administrative Court of Lazio issued ruling No. 3886 on May 5, 2011, on FIBE’s appeal (RG No. 9942/2009) for the local public authorities’ non-payment of FIBE’s non-amortised costs at December 15, 2005, for the Campania RDF plants. It upheld FIBE’s appeal and ordered the local public authorities to pay FIBE € 204,742,665.00 plus legal and default interest from December 15, 2005, until settlement.
The Administration proposed a number of initiatives aiming to avoid payment of the amount due up until the Enforcement Judge of the Court of Rome, in the decision dated July 24, 2013, ordered that FIBE be paid € 240,547,560.96 to cover the receivable due for principal and legal interest. The judge also suspended the enforcement procedure for the additional interest requested and set a deadline of November 30, 2013 for the merits ruling about the opposition.
Both parties have initiated proceedings on the merits and the hearing is scheduled for December 1, 2014.
Still on the subject of payment of the costs not depreciated at December 15, 2005, for the Campania RDF plants measures are being taken to recover the VAT paid on the principal amount collected of € 204,742,665.00 ordered to be paid by the judge. The enforcing judge that the company relied on to successfully settle its claim, after concluding that there were some doubts on whether or not the amount recognised was subject to VAT, suspended the enforcement procedure. This order was confirmed by the Court en banc session, with its ruling on September 23, 2014. The company is currently engaged in taking the appropriate legal action to recover the amount.
During the various stages of the USW Campania projects, the Group had to deal with a large number of administrative measures regarding reclamation and the implementation of safety measures at some of the landfills, storage areas and RDF facilities. The unsuccessfully resolved proceedings are on hold pending the merit hearings. For the proceedings regarding the characterization and emergency safety measures at the Pontericcio site, the RDF facilities in Giugliano, the temporary and permanent storage area at Cava Giuliani, the Regional Administrative Court of Lazio, with ruling 5831 and 6033 of 2012, rejected the appeals filed by Fibe s.p.a.. An appeal against this ruling, based also on contamination found at a site different to those subject of the proceedings, was filed with the Council of State. They denied FIBE’s precautionary motion to stay the enforcement of the decision. A date for the merits hearing has not been set yet. Meanwhile, Fibe is continuing with the characterization operations for the above sites, but this does not constitute any admission of liability whatsoever.
By a summons served in May 2005, the Government Commissioner filed an action requesting compensation from FIBE, FIBE Campania and FISIA Italimpianti for alleged damages of about € 43 million. In the course of the proceedings, the Government Commissioner increased its damage claims to over € 700 million, plus a further to claim for damages to its image quantified at € 1 billion.
The Companies joined the proceedings and, in addition to disputing the claims made by the Government Commissioner, filed a counterclaim requesting compensation for damage and sundry charges determined in the initial filing at more than € 650 million, plus a further to claim for damages to their image quantified at € 1.5 billion. More specifically, the respondent Companies complained about the significant delay (compared with the schedule of the 2000 and 2001 contracts) in issuing the permits required to build the waste-to-energy facilities and the resulting delay in the construction of such facilities. These delays led both to a lengthening of the temporary storage period of the so-called “eco-bales” produced and an increase in the volume of stored “eco-bales,” which resulted in the need to find bigger storage areas: circumstances that caused the contractors FIBE and FIBE Campania to incur greater costs.
In the same proceeding, the banks that issued FIBE and FIBE Campania’s performance bonds to the Government Commissioner also moved for the Commissioner’s claim to be denied and, in any case, asked to be held harmless by Impregilo from the commissioner’s claims. Salini Impregilo (then Impregilo) joined the proceedings contesting the request of the guarantor banks.
The public prosecutor appealed against the ruling of April 11, 2011, which found that jurisdiction rested with the administrative court and not with the ordinary court. The hearing for closing arguments before the Naples Court of Appeals is set for December 11, 2014.
By a “reactivation brief” filed on August 1, 2012, the Ministry of Justice and the Cassa Ammende reactivated before the Court of Milan the proceedings concerning the enforcement of sureties totaling € 13,000,000.00 provided by some large credit institutions to guarantee the performance of the orders issued by the Public Prosecutor of Naples in connection with the seizure of the RDF facilities.
With decision no. 6907/14 the Court of Milan denied the requests made by Cassa Ammende and by the Ministry of Justice against the banks, UniCredit and ABC International Bank PLC, accordingly declaring the claims for recourse filed by the banks against IMPREGILO and Fibe and the latter against the Office of the Prime Minister absorbed.
The Ministry of Justice and the Cassa Ammende filed an appeal against this decision. The related proceeding is scheduled to be brought before the Milan Court of Appeals on January 15, 2015
Finally, the public authorities have recently commenced proceedings challenging FIBE’s operations with respect to the complex situation of receivables and payables arising from the contractual phase. Although these are separate from the other proceedings described above, they refer to the same claims filed by FIBE in the administrative courts that the acting commissioner is still working on. Accordingly and comforted by the advice of counsel that supports it in this complex context, the Group believes that FIBE’s fully compliant conduct during the “contractual” period can reasonably be confirmed and that the risk of a negative outcome of these proceedings is merely possible. Specifically, the Company’s counsel believes that the public administration’s claims can reasonably be resisted considering the counterclaims and, moreover, the admissibility in these proceedings of a court ordered offsetting process.
Lastly, pending proceedings include a lawsuit in opposition to a payment injunction issued by FS Logistica (formerly Ecolog) against the Office of the Prime Minister for the payment of consideration owed for assignments it received from 2001 to 2008 by the then Government Commissioner for shipment of waste outside Italy. The claim, made through a summary procedure, was lodged against the Office of the Prime Minister which turned to FIBE as guarantor. FIBE, on the one hand, objected pointing out that this request for guarantee was the same as the one already subject of lawsuit filed by the Office of the Prime Minister/Government Commissioner before the Court of Naples and concluded with Decision No. 4253/11, as mentioned above, in which the Court found that it lacked jurisdiction, and, on the other hand and with regard to the counterclaims lodged by the Office of the Prime Minister, noted both the inadmissibility of the counterclaims due to the totally different titles compared with the original claim of FS Logistica and the fact that these counterclaims had already been put forth by the Office of the Prime Minister in numerous other proceedings that are still pending. Following a hearing held on July 11, 2013, the judge adjourned the proceedings and scheduled a discovery hearing for January 24, 2014. At that hearing, the judge allowed a court ordered technical expert’s report only with regard to the claims of FS Logistica towards the Office of the Prime Minister and subject to the payment injunction. The next hearing will be held on January 25, 2015.
In September 2006, the Public Prosecutor of the Court of Naples served Impregilo S.p.A., Impregilo International Infrastructures N.V., FIBE S.p.A., FIBE Campania S.p.A., FISIA Italimpianti S.p.A. and Gestione Napoli in liquidation with a “Notice of the completion of the preliminary investigation about the administrative liability of legal entities” related to the alleged administrative violation pursuant to Article 24 of Legislative Decree No. 231/2001, within the framework of criminal proceedings against some former Directors and employees of the above-mentioned companies, who were being investigated for the crimes subject of Article 640, Sections 1 and 2, No. 1, of the Italian Criminal Code in connection with the contracts for management of the urban solid waste disposal cycle in the Campania region. Following the preliminary hearing of February 29, 2008, the Preliminary Hearing Judge at the Court of Naples granted the motions for indictment made by the Public Prosecutor.
It is also worth mentioning in this regard that the Court, upholding the exception raised by the defence counsels of the Companies, excluded the option of allowing parties to join the proceedings as plaintiffs seeking damages from the public entities involved pursuant to Legislative Decree No. 231/2001 and, consequently, declared that all filings to join the proceedings as plaintiffs seeking damages from the companies were inadmissible.
As part of these proceedings, the Judge for the Preliminary Investigation ordered, in his ruling on June 26, 2007, the precautionary seizure of the profit from the alleged crime, estimated to amount to about € 750 million.
The precautionary proceedings continued for five years and finally ended in May 2012, without any action taken against the Group. On November 4, 2013, the Court of Naples handed down a decision finding all defendants not guilty on all charges. In March 2014, the Naples Public Prosecutor appealed the decision.
In 2008, as part of a new investigation by the Court of Naples into waste disposal and related activities in the region carried out after the termination of the contracts by force of law (on December 15, 2005), the Preliminary Investigations Judge, upon a request by the Public Prosecutor issued preventive measures against some managers and employees of FIBE, FIBE Campania and FISIA Italimpianti and managers in the Commissioner’s office. As part of this investigation, which in the record is described both as a continuation of an earlier investigation and as separate proceedings based on new charges, the former contractors and FISIA Italimpianti are again charged with the administrative liability attributable to legal entities pursuant to Legislative Decree No. 231/01.
The preliminary hearing was completed on January 29, 2009 with the indictment of all defendants, while at the hearing held on March 21, 2013, the Preliminary Hearing Judge indicted all defendants and legal entities involved pursuant to Legislative Decree No. 231/2001 for all of the charges in the proceedings before the Court of Rome scheduled for July 16, 2013.
During this hearing, the Court of Rome adjourned the proceedings to April 1, 2014, where judgement was delivered by the Fifth Criminal Chamber of the Court of Naples for the "parent" case (15940/03 R.G.N.R.). This will also serve to better assess the requests of evidence that will be presented by the parties at the hearing scheduled for November 18, 2014.
The Group companies involved in the new proceedings firmly believe that their actions were lawful, because their activities were not only expressly mandated by Law No. 21/2006 but were also carried out “merely at the behest” of the Delegated Commissioner.
On December 23, 2011, FIBE S.p.A., in its capacity as the legal entity involved pursuant to Legislative Decree No. 231/01, was served with a notice of completion of the preliminary investigations related to another investigation by the Naples Public Prosecutor. The charges are based on a violation of Article 24 of Legislative Decree No. 231/01, as it applies to the occurrence of the crime subject of Article 81, Section Two, Article 110 and Article 640, Sections 1 and 2, of the Italian Criminal Code, committed jointly and with the prior agreement of the defendants (individuals) and other parties to be identified, in connection with the management of an urban wastewater purification service based on treatment facilities.
Specifically, certain individuals from the Commissioner’s Officer and FIBE S.p.A. allegedly actively encouraged and induced other competitors to implement stratagems and tricks to hide and conceal the very poor management of the above-mentioned wastewater treatment facilities.
FIBE S.p.A. is a defendant because it allegedly submitted expense reports that, among the other items related to the disposal of USW, included the cost of transporting leachate, while failing to mention the fact that the leachate was transported to facilities without the requisite proper permit and lacked the technical qualifications and residual treatment capacity.
The public prosecutor filed a motion requesting that the Judge for the Preliminary Hearing at the Court of Naples hear the case. At the hearing held on May 19, the Judge, Mr. Modestino, upholding the lack of functional jurisdiction of the Court of Naples, pursuant to article 11 of the Code of Criminal Procedure, presented by the defence of the “public party”, ruled that it lacked jurisdiction and ordered that the record of the proceedings be forwarded to the Rome Public Prosecutor. This was also based on this proceeding's connection with the so-called “Rompiballe” case already transferred to Rome pursuant to Article 11 of the Code of Criminal Procedure as a result of an acting magistrate being listed by the Public Prosecutor of Naples as being under investigation.
We are awaiting the Rome Public Prosecutor's decision on prosecution.
As it relates to events challenged in the period after the contracts were terminated, when the companies’ activities were not solely specifically covered by Law 21/2006 but also carried out on behalf of the commissioner, the Company is fully convinced that it acted in accordance with the law.
Assessment by the Board of Directors regarding the status of the USW Campania Projects at September 30, 2014
Salini Impregilo Group's general situation with respect to the USW Campania Projects at September 30, 2014, is still extremely complex and uncertain.
The rulings by the administrative courts regarding the claims put forth for the costs of the RDF facilities that had not been amortized when the service contracts were cancelled (December 15, 2005), as discussed earlier in this Report, are positive and extremely important factors, because they support the Group’s arguments regarding the correctness of its conduct and the resulting assessments made to date.
Although, at the end of March 2014, the Naples Public Prosecutor appealed the decision by which the Court of Naples acquitted of all charges - with the formula "there is no case to answer" - both the individuals and the companies involved, it is confirmed, consistent with the opinion of the Group's legal advisors for the case, the belief that future developments of these proceedings and of proceedings pending in other venues (administrative, criminal and civil) will prove that the Group acted properly. Taking also into account the recent rulings handed down by the administrative judges regarding the previously mentioned environmental issues, which are still pending with regard to merit and for which the risk of an unfavorable outcome was assessed, with the support of the counsel assisting FIBE in the various disputes, as being in the realm of mere possibility, at this time, an accurate timing for the end of the various pending proceedings cannot be reasonably determined.
In view of the complexity and development of the different disputes described in detail in the preceding paragraphs, the possibility that future events, unforeseeable at this point, could occur requiring changes to the assessments made thus far cannot be excluded.