Alibaba And His Crores

Hassan Ali has suddenly become the evil face in the campaign against black money stashed in tax havens abroad. At last count, he had nearly $8 billion in one of his Swiss bank accounts and owed the national exchequer between Rs 40,000 crore and Rs 72,000 crore as unpaid taxes. His activities have been under the scanner since January 2007, when I-T officials raided his home in Pune and seized a laptop and documents that revealed multiple black money trails. But it took a rebuke from the Supreme Court—“What the hell is going on in this country...minor offenders are shot down for violating Section 144 CrPC, but you don’t take any action against these people”—for the agencies to make their move. Khan was finally arrested in Mumbai on March 7 by the Enforcement Directorate (ED).

His arrest, as Khan’s lawyers ironically point out, was only to escape further censure from the apex court. The ED sought custody in a Mumbai sessions court but was refused twice in three days. Principal sessions judge M.L. Tahiliyani instructed the directorate to do its homework properly, “prima facie you have to make a case”. Khan’s custody was sought under the Prevention of Money Laundering Act (PMLA) but the ED brought on record only his violations relating to multiple passports and forgery. And this is only one of the many inconsistencies and contradictions in the Hassan Ali Khan case. Which, say some former sleuths, is reason enough for the apex court to constitute a special investigation team, especially considering its observation that Khan could also be charged under anti-terror laws.

Here are some of the other aspects that do not add up:

• Khan, sources reveal, is also involved in the clandestine transfer of cash/valuables outside the country with the help of foreign nationals. This was the finding recorded in a 2007 note from the then additional commissioner of Income Tax (Investigations), Mumbai, to the ED. The 2007 raid yielded information about Khan’s money-laundering empire with associates in Gurgaon, Calcutta, Mumbai and abroad. There were also details of his various accounts with the United Bank of Switzerland and other banks. The multiple passports case had already come to light. Yet the ED never sought his custody or interrogated him. Only one of his associates, Kashinath Tapuriah in Calcutta, has now been raided. The four-year delay and tardy progress raises the doubt whether the agencies were under pressure not to act.
• Khan has not filed I-T returns since 1999. He claims his annual income is
  Rs 30 lakh. Yet, he opened his first Swiss bank account in 1982 with $1.5 million, deposited $240 million within a couple of years, and by December 2006, had $8 billion in it. Despite an ED notice regarding this in 2008 and an I-T demand for Rs 40,000 crore in unpaid taxes, Khan seemed to escape all attention and operate below the radar. How and why?
• Three officers of the ED who took up the case were transferred during the course of their investigation. This did not escape the SC’s attention—it wanted to know why the transfers were effected.
• The ED knew about transactions between Khan and arms dealer Adnan Khashoggi in 2007. A three-member panel of the ED and I-T had traced them. The I-T showcause notice to Khan in 2007 identified various persons who had enabled him to open an account in UBS Singapore; Khashoggi too had recommended Khan to the bank. Yet, Khan was never booked under anti-terror laws.
• The details of the Khan-Khashoggi transactions include a property deal in Lucerne, Switzerland, that the ED estimated at $300 million which, sources say, had come from Khashoggi’s account in Chase Manhattan Bank in New York.
• The case focused on one UBS account of Khan. In the 2007 raid, it was believed to have had $8 billion. The investigation did not extend to the other accounts he had either in UBS or other banks across the world. The accounts he held in the names of his “fictitious companies” were not under scrutiny either. Worse, even that one UBS account was not frozen. Union finance minister Pranab Mukherjee’s statement on January 25, 2011, that there was no money in the account begs the question: why was Khan allowed to operate or clean out his accounts over four years?
• Khan’s associate Kashinath Tapuriah had told the ED in 2007 that he had been introduced to Khan in the 1990s by “Congressmen MPs” who knew of his (Tapuriah’s) financial difficulties. Who were these Congressmen?
• A 2001 agreement reveals that Khan and Tapuriah had a 50-50 partnership. And two of Khan’s companies had transferred $200 million to three companies owned by Tapuriah. Yet, none of this was further investigated.
• The UBS claimed in January 2011 that the account referred to by the ED was fictitious because the papers submitted to it were forged. Why did the ED not take up this issue with the bank earlier?
• In July 2009, two-and-a-half years after the raid on Khan, letters rogatory were sent to the US, UK, Hong Kong, Singapore and UAE but they have not been pursued.

Sources in the ED have a qualified response: they disclose that though they will examine Khan’s money-laundering offences, the aspect of this money being used to fund terror activities was beyond its purview. Getting Khan’s custody from a Mumbai sessions court itself proved to be difficult for the ED; the agency was asking for 14-day remand under PMLA without making a proper case against him. After knowing all that it does, the ED failed to establish that Khan had committed criminal offences and laundered money that was generated from it. If and when his money-laundering is established, it will still leave open the question: how many people and who exactly did Khan front for?