The Money Trail
- The total contract for supplying 12 helicopters: Rs 3,600 crore
- Estimated business development cost (or bribe): Rs 385 crore (about 51 million euros)
- Christian Michel and Haschke paid: Rs 226 crore (30 million Euros)
- Money parked in Tunisia by Michel and Haschke: Rs 181 crore (about 24 million Euros)
- Evidence collected by the CBI of remittances to India: Rs 43 crore (about 5.8 million euros, through firms in Mohali and Chandigarh)
It was in a room in a secluded wing on the first floor of the Claridges Hotel in Delhi that Christian Michel James usually stayed. He patronised the hotel not because it belonged to a fellow arms dealer but because, as he claimed, the rooms in that section of the first floor weren’t bugged. That was sometime in 1999, when the Briton was a frequent visitor to New Delhi’s corridors of power, cultivating politicians, bureaucrats and the media. The tall, suave and soft-spoken Michel, now in the eye of the AgustaWestland storm rocking Parliament, was nothing if not cautious.
Mobile phones were the rage then, but Michel knew the perils of using them; he’d communicate on the hotel landline. A decade and half on, records of calls from his hotel room are the subject of intense scrutiny, of both the Enforcement Directorate and the CBI. They throw up a vast repertoire of names, connections and friends Michel had. Investigators confirmed to Outlook that several calls were traced to the Barakhamba Road corporate office of a major Indian defence company in Delhi. The investigation, however, was cut short: sleuths were told not to probe further.
Michel’s caution didn’t help in the end, with a court in Milan accusing his company of being the recipient of some 44 million euros paid by AgustaWestland’s parent company Finmecannica. Michel, Carlos Gerosa and Guido Haschke were middlemen engaged by Finmeccanica to deal with India’s movers and shakers. With 11 others, they’ve been named in the CBI’s preliminary enquiry of 2013 for allegedly receiving illicit payments from AgustaWestland. Also named is IDS Infotech, a Chandigarh-based software firm whose director is a brother of Santosh Bagrodia, coal minister in the previous Congress government. The allegation is that money for the chopper deal was routed through this company and its branches in Morocco and Tunisia. “On the face of it, the money was meant for software contracts. However, it’s clear the work was overvalued. And while some money, approximately three-four million euros, did come to IDS Infotech, the point is most of it did not. At least, 17 to 18 million euros was money we feel was overvalued. The question is where did this overvalued amount go,” ask CBI officials.
Do the initials in the explosive note refer to Ahmed Patel?
Initially, payments came from AgustaWestland, but ED documents accessed by Outlook reveal that “later, a maze of companies were formed in different companies”. These were for channelising money against fabricated invoices in the guise of work done by these companies, based in tax havens like Mauritius and countries like Tunisia. The money trail for the overvalued amounts disappears from Tunisia and Mauritius,” say ED officials, adding that the overvaluations could be kickbacks. All the government has against Michel so far is a flat and an FD seized by the ED. Letters rogatory to UK, Italy, Israel and Tunisia have hit a dead-end.
But it’s the political slugfest that has put the Congress in a tight spot. On April 28, after Parliament was disrupted for about a week, the government made a statement that corruption was the core issue and it would do everything to bring the wrongdoers to justice. The day before, the Congress had tried to brazen it out, with party chief Sonia Gandhi saying the outing of documents from Italian courts was part of character assassination and a witch hunt. Her political secretary, Ahmed Patel, says, “There’s not an iota of truth in this. It is simply a witch hunt. We are examining it legally and will fight it out politically.” The Congress defence is that a handwritten note budgeting millions of euros to “family”, “bureaucrats” and an “AP” is flimsy evidence. Says party leader Randip Surjewala, “It’s not even a part of the court judgement. Anyway, how can we be held guilty when we are not even a party to the case and nor is the government of India.” The government, however, says questions are being raised on trivial technicalities to distract from the core issue of corruption. But both sides are clear on one thing: bribes were paid. Says a government statement: “The contract for supply of 12 helicopters signed with AWIL on February 8, 2010, was terminated with effect from January 1, 2014. The main reason was breach of the provisions of the pre-contract integrity pact and breach of terms of contract by AWIL.”
Former chief of the IAF, S.P. Tyagi
It was the arrest of Guiseppe Orsi, CEO of Finmeccannica, in 2013 that set the ball rolling. The CBI filed a preliminary enquiry (PE) and in an unprecedented move, it was good enough for the government to cancel the contract. So if bribes were paid and the contract cancelled, why did the CBI choose to close the case—as Michel told the PM—“for want of evidence in July 2015 and reopened in September 2015” when there was actually no fresh evidence.
So how strong is the evidence? The Italian court of appeal has found Orsi guilty of corruption, though the lower court had simply said it’s overinvoicing he is guilty of. That apart, there are three handwritten notes linking the deal to Indian politicians. The most damaging, politically, is an alleged handwritten note of Michel to Haschke on how to distribute the total commission of 30 million euros. Air force officials were allotted six million euros and bureaucrats, including officials of the defence ministry, 8.4 million.
The note says leaders closely connected to Sonia were to be allotted 15-16 million euros. The “family” and AP, who some view as Sonia’s political secretary, Ahmed Patel, are the others who needed to be paid off, the note indicates. Sonia’s figures four times: she’s called the “driving force” behind the deal. In a letter dated March 15, 2008, seized by investigators, Michel, having written to Peter Hulett, then India sales head of the chopper company, says, “Dear Peter, since Sonia Gandhi is the driving force behind VIPs, will no longer fly in the MI-8. Gandhi and her closest advisors are the people who the British ambassador should target.” The letter is said to have been seized from the house of Haschke in early 2013. And from behind bars, Orsi is said to have wriiten a handwritten note to a friend, quoted on pages 163 and 164 of the Italian court’s judgement: “Call Monti or amb. Teracciano in my name to ask him to call the PM Singh.” The note was apparently seized from Orsi’s prison cell. The judgement says it’s after the seizure of this note that cooperation and information from the then UPA government dried up.
Orsi, serving an 18-month plea-bargain term
Investigators can reach the bottom of Bofors-2, as this chopper deal is being called, only if it can get to Michel, holed up in Dubai. Of the 55 million euros allegedly paid as bribes, some 30 million euros allegedly was given to Michel to pay off Indian politicians. With Michel out of reach of Italian investigators, the only other middleman they could question, investigate, wiretap and bug the cars and home of was Hashcke, who was subsequently arrested. He’s serving an 18-month jail term after entering a plea bargain naming the Tyagi brothers as being paid off 10 million euros. While Hashcke said the money was never paid to Air Chief Marshal S.P. Tyagi, the courts did not agree. The money, according to the middleman, was in exchange for information. The courts ruled that the Tyagi brothers accessed information because of their proximity to the air chief. Julie Tyagi, one of Tyagi’s cousins named, was not available for comment. Then NSA M.K. Narayanan told Outlook, “I have no idea about these kickbacks or about allegations of specifications of the helicopters changing. In any case, these were details that came to the ministry of defence and not to the NSCS.”
Michel, in his defence, had written to Prime Minister Narendra Modi claiming innocence. The handwritten notes, he said, were deliberately planted, in a time-tested trick, by Hashcke, with whom he had fallen out. And the note did the trick. He says he has never met Mrs Gandhi or anyone from her family. His firms, of which there are a maze, have been probed by five auditors who have given them a clean chit, he claims.
That, however, is not the finding of the Italian court. An arrest warrant for Orsi said he had “transmitted to the consultant Michel Christian...around 30 million [euros], in order in part to carry out corrupt activity with the goal of acquisition of the deal and the execution of the contract”.
Michel’s contends, of course, he’s a victim of politics both in India and in Italy.
Step By Step To A Chopper
1999: IAF seeks to replace its fleet of Mi-8 helicopters for VVIP movement.
2002: A global request for proposals (RFP) was issued. Four vendors responded. AgustaWestland not considered because of its chopper’s inability to operate at an altitude of 6,000 meters
2003: PMO regrets that neither PMO nor the SPG had been consulted on the issue
2005: Operational requirements deliberated by IAF, NSA, SPG, PMO & MOD
2006: A fresh RFP issued. Three vendors, including AgustaWestland, respond
2008: Field evaluations carried out in the UK and USA
2009: Contract Negotiation Committee recommends AW-101
2010: Approval by the Cabinet Committee on Security
2012: First reports in the media about bribes surface
2012: Indian Embassy in Rome writes to prosecutors in Naples for details
April, 2012: Ministry of Defence writes to ED and CBI to inquire into deal