Tuesday, May 21, 2013

Agusta Westland Chopper SCAM: Bribe charges hit Italian copter deal

350cr Kickback Suspected In 3,546cr Purchase CEO Of Supplier Firm Arrested
Defence Ministry Forced To Order CBI Investigation
New Delhi: A couple of arrests in Italy sent ripples down the corridors of power in South Block here on Tuesday, forcing the government to order a CBI probe into whether bribes influenced the purchase of 12 swanky VVIP helicopters from Italian aerospace and defence giant Finmeccanica to ferry the President, the PM and other Indian dignitaries.

The dramatic developments came as a setback to the defence ministry which inked the Rs 3,546-crore contract for the 12 three-engine AW-101 helicopters in February 2010, and had earlier repeatedly refused to order a probe into the deal “in the absence of any specific information’’ despite the allegations of huge kickbacks swirling around for over a year.

But on Tuesday, with yet another defence scandal threatening to blow up in the face of the UPA government in the run-up to the 2014 general elections, defence minister A K Antony was constrained to order the CBI probe. This came after Italian authorities arrested Finmeccanica chief executive Giuseppe Orsi in Milan. Three others, including the head of the Italian major’s UK-based unit AgustaWestland, Bruno Spagnolini, were also placed under house arrest by an Italian magistrate.

Although connected to the alleged payment of 51 million euros by AgustaWestland to a Switzerland-based middleman to swing the Indian VVIP chopper deal, the arrests come as part of the wider ongoing judicial investigation in Italy into financial malpractices as well as political kickbacks and bribes by some major Italian industrial giants to bag contracts.

The deal was signed because of a forceful push by the Special Protection Group (SPG), the elite corps which provides proximate security to the Prime Minister, and the IAF, which wanted to replace its ageing Russian-origin VVIP helicopters, despite the defence ministry’s initial wariness and stiff competition from Americans.

The AW-101 helicopters, armed with self-defence systems like missile-approach warners, chaff and flare dispensers and directed infra-red electronic counter-measures to protect the VVIPs on board, were pitted against the American Sikorsky’s S-92 Superhawks during extensive field trials held in India in 2008.

The US firm had later claimed the trials were unfairly biased against it, but India had gone ahead with the AW-101 contract.

THE DEAL | On Feb 8, 2010, the defence ministry signed a 3,546cr deal to buy a dozen helicopters for Indian VVIPs. UK-based AgustaWestland, subsidiary of Italian military consortium Finmeccanica, was to supply AW101 helicopters
STATUS | 3 of these helicopters have arrived in India. Three more coming by May-June. Entire fleet to be in place by March 2014
USERS | President, PM, V-P, and other top dignitaries WHO CLEARED IT | Cabinet Committee on Security headed by PM Manmohan Singh. It was vetted by defence ministry under A K Antony and finance ministry under Pranab Mukherjee

Italian investigators suspect a kickback of up to 51 million euros (about 350cr). Of this, up to 30 million euros may have been routed through Christian Michel, a UK-based alleged middleman, back to Italy for payments to politicians and others

Christian Michel and Swiss citizen Guido Haschke suspected to be key middlemen. The names of lawyer Gautam Khaitan, Sanjeev Tyagi (cousin of a former IAF chief), and a firm, Aeromatrix, also allegedly figure in taped conversations Too costly for US, India buys a dozen

In 2009, US President Barack Obama turned down a variant of the AW-101 as it was very expensive and chose to upgrade the existing fleet rather than buy 28 copters as planned. India, however, agreed to buy 12 AW-101 helicopters a year later for Rs 3,546 crore.

Three of the 12 choppers have already been inducted into the IAF’s elite Communication Squadron, which ferries around the President, Prime Minister and other VVIPs, at the Palam airbase. India apparently opted for the copter due to its advanced self-defence systems. AW didn’t give up hope in the US though. Last heard, another AW-101 variant was again in contention to bag the US Navy’s latest programme to develop the Marine One Presidential Helicopter.

Bribery charges may hit other defence deals
New Delhi:Defence minister A K Antony after the AW-101 deal, which has come under glare, had publicly stated, “SPG and IAF repeatedly told us the helicopters were urgently required because of the changing security scenario...the finance ministry (then headed by Pranab Mukherjee) also agreed later. The Cabinet Committee on Security then took a considered decision.’’

But later it had also emerged that some of the technical parameters in the VVIP helicopter contract had been tweaked, which could have helped the AW-101 to qualify for the project. For instance, the earlier requirement for the choppers to be able to fly at an altitude of 6,000 metres was later reduced to 4,500 metres. As it happened, the Sikorsky chopper could not meet even this requirement, but the AW-101 sailed through.

The suspicion of bribery in an important defence deal could not have come at a worse time for a government which has struggled to fend off the perception of a spike in corruption under its charge. It can further hinder the conclusion of crucial, already much-delayed, defence acquisitions as well as raise doubts about the oft-repeated claims of the ministry of defence about the effective ban in place against middlemen and arms dealers.

MoD officials here claimed they were “still clueless” about the ongoing Italian probe. “We have not received any specific input from the Italian and UK governments about the allegations despite requests. Let the facts come out through the CBI investigation…We will take action,” said a senior official. The external affairs ministry spokesperson added, “We had asked the government of Italy through our mission in Rome for details of the investigation but were told that it is a judicial process and the government of Italy is unable to share any information. That remains the position even today.”

MoD officials said the contract as well as the “integrity pact” inked with AgustaWestland has the “standard” anti-graft penalties for the use of undue influence as well as against the employment of agents or payment of any commission. “Any breach of the provisions entitles MoD to cancel the contract as well as other dealings with the company. Moreover, imposition of penal damages and forfeiture of bank guarantees, as also criminal charges, can come into play if the allegations are proved,” said the official.

The controversy will have a bearing on another helicopter contract to be discussed by the Antonyled Defence Acquisitions Council on Wednesday. This contract is for the joint Army-IAF procurement case of 197 new light-utility helicopters for over Rs 3,000 crore, with the Russian Kamov Ka-226T pitted against Eurocopter AS 550 C3 Fennec.
Rajat Pandit TNN

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