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Italian police arrest two former Finmeccanica managers in waste probe

The headquarters of Italian defence and aerospace company Finmeccanica is seen in Rome May 3, 2012. REUTERS/Max Rossi

NAPLES, Italy (Reuters) - Italian police arrested two former executives at state-controlled industrial group Finmeccanica SpA on Monday in an investigation relating to a waste tracking system project.

The arrests stem from an investigation by Naples prosecutors into the "Sistri" system devised to electronically trace the transportation and disposal of industrial and agricultural waste, some of which is toxic.

Finmeccanica electronics unit Selex Service Management won the 400 million euro ($551 million) contract to design, manage and maintain Sistri in December 2009. The nationwide system has suffered delays and has not yet become fully operational.

In a statement, police said Lorenzo Borgogni, former head of Finmeccanica's external relations, Stefano Carlini, a former director of Selex Service Management, and two other Italian executives had been placed under house arrest.

They are accused of alleged criminal association and corruption, police said in a statement on Monday.

It was not immediately possible to get a comment from their lawyers. Finmeccanica, which underwent a management reshuffle in February 2013, declined to comment.

The probe has looked into allegations that bribes were paid.

"The investigation has shown that large slush funds were created through a complex system of false invoicing between Selex Service Management and several complicitous firms," the police statement said.

"According to the investigating magistrates, (the funds) were set up with the purpose of paying bribes, also through the creation of foreign companies in tax havens such as Delaware and the setting up of (secret) accounts in Switzerland".

As part of the investigation, Italy's police in April arrested other people including Sabatino Stornelli, former CEO of Selex Service Management, accused of crimes such as criminal association, false invoicing and corruption.

At the time of the April arrests, investigative sources said the false invoicing totalled 40 million euros.

In its annual report published last week, Finmeccanica said a trial against Stornelli had started and that the group had filed a civil action for damages against certain suppliers and sub-suppliers over Sistri. ($1 = 0.7255 Euros)

(Reporting by Roberto Landucci and Danilo Masoni; Editing by David Holmes)