The two Bs – Bofors & Bangaru

The two Bs – Bofors & Bangaru Nyayapati Gautam Triumphant Institute of Management Education P Ltd

The Bofors Saga • The Bofors deal was struck in 1986. • The idea was to replace the old field guns and artillery in the hands of the Army. • The decision was to induct the bigger calibre 155 mm howitzers. • The Haubits FH-77 gun manufactured by AB Bofors of Sweden, a company which was once owned by Alfred Nobel, was selected. • AB Bofors would supply the Indian Army with 410 155-mm howitzers. • An option to license-produce 1000 more guns was also included in the deal. • The amount was a significant $285 million for a pre-liberalisation India.

The Bofors Saga • A few months later Swedish Radio reported that Bofors had paid commissions to middlemen for securing the Rs 1,600 crore deal in contravention of Indian laws. • But for three years, the Congress government did not let the CBI register an FIR in the case. • The FIR happened only on 22 January 1990, when VP Singh ousted Rajiv Gandhi in the 1989 election.

The Bofors Saga • While the CBI did not find a payoff link to Rajiv Gandhi, there is little doubt he held up the investigations for fairly obvious reasons. • The family’s proximity with OttavioQuattrocchi, who was a proven recipient of illegal money. • In June 1987, at the height of the scandal, the then Minister of State for Defence Arun Singh prepared a note and got ratified it by the then Defence Minister KC Pant. • The note was categorical that: • the Indian government should threaten to snap diplomatic ties with Sweden • cancel the Bofors gun deal if Bofors would not give names of middlemen.

The Bofors Saga • When this letter was sent to Rajiv Gandhi for final approval he wrote back saying – • It is unfortunate that MOS/AS has put his personal prestige above the security of the nation before even evaluating all aspects. • Has he evaluated the actual position vis-a-vis security? • Has he evaluated the financial loss of a cancellation? • Has he evaluated the degree of breach of contract by Bofors, if any? • Has he evaluated the consequences for all future defence purchases if we cancel a contract unilaterally?

The Bofors Saga • Has he evaluated how rival manufacturers will behave in the future? • Has he evaluated how GOI prestige will plummet if we unilaterally cancel a contract that has not been violated? • To the best of my belief the Swedish Audit report upholds GOI position and does not contradict it. What we need to do is to get to the roots and find out what precisely has been happening and who all are involved. • Knee-jerk reactions and stomach cramps will not serve any purpose. • RRM (Arun Singh) has run the ministry fairly well but there is no reason to panic, specially if one’s conscience is clear.

The Bofors Saga • Clearly, Rajiv Gandhi played the national security card to stymie the probe. • This note of Rajiv Gandhi set the tone for further investigations into Bofors. • The first result was Arun Singh’s resignation three days later. • Funnily enough the Army had no problem with the RRM’s strategy.

The Bofors Saga • CBI files show that the then Indian Army chief, General K Sundarji, wrote a note to then Defence Secretary SK Bhatnagar: • “If India threatened to cancel the contract with Bofors, there was a 99.9 percent chance that Bofors would ‘cough up’ the information about the persons who had received the money and that in the event of actual cancellation of the contract, the delay caused in acquiring an alternate gun could be borne by India.” • General Sundarji’s note, however, was found awkward by the Rajiv Gandhi administration. • And SK Bhatnagar did ask him to modify the note. When he refused to do so, Bhatnagar returned his note.

The Bofors Saga • The situation now was that the top brass of the Indian government was on the same page in June 1987. • The country’s army chief asserted that cancellation of the Bofors deal would not affect security. • The Attorney General for India too had given advice to the Ministry of Defence that the Bofors contract could be cancelled. • Arun Singh and KC Pant had already spoken in favour of threatening Bofors with cancellation for getting names of the middlemen. • Even SK Bhatnagar was for serving the ‘cancellation’ threat..

The Bofors Saga • In his recent interview, Lindstrom notes that even without these threats, but fearing cancellation Bofors actually “sent its top executives to India with the one-point task of giving out the names. Nobody of any consequence received them.” • How could this have happened without pressure from the highest in the land? • The pressure was evident from the fact that a month later, in July 1987, Bhatnagar did an about turn and expressed a totally different view opposing the threat of cancellation of the Bofors contract.

The Bofors Saga • Not only this. On 16 September 1987, the CBI files say, Swedish Chief Prosecutor Lars Ringberg made a request to India, through Interpol, for assistance in his enquiries from the government of India. • “Are the Indian investigation authorities interested in exchange of information with the Swedish preliminary leaders?” asked Ringberg’s letter. • Apart from referring the message of Lars Ringberg to the JPC no further action was taken on the message says the CBI. • In fact, Ringberg had to withdraw the inquiry inconclusively because of non-assistance of the Indian government.

The Bofors Saga • Under immense pressure and as a face-saver, a Joint Parliamentary Committee (JPC) was set up to probe the allegations on August 6, 1987. • It submitted its report two years later.

The Bofors Saga • The Bofors kickbacks became the key poll issue in the November parliamentary polls in 1989. • The Congress was defeated and on December 26 of the same year, Prime Minister VP Singh's government barred AB Bofors from entering into any further defence contract with the Government of India. • Incidentally VP Singh was the defence minister when the deal was signed.

The Bofors Saga • On January 22, 1990, the CBI registered the first formal complaint in the case. • However, Rajiv Gandhi was assassinated by LTTE suicide bombers on May 21, 1991. • This led to a general slackening of the investigative process. • Many observers say this allowed Quattrocchi to leave India in the end of July, 1993. • When Joginder Singh joined as CBI Director in 1996, only one witness, that is a retired under-secretary in the defence ministry, had been examined three times.

The Bofors Saga • After years of legal procedures on January 21, 1997, the Swiss authorities gave the Government of India secret documents which allegedly ran into over 500 pages. • A week later, a special investifative team was set up by the CBI to investigate the case. • Later in the same year, the CBI filed formal charges against Rajiv Gandhi, OttavioQuattrocchi, AB Bofors and its former chief Martin Ardbo, defence secretary SK Bhatnagar and AB Bofors agent Win Chadha. • Letters were sent out to Malaysia and UAE seeking the arrest of Quattrocchi.

The Bofors Saga • In the subsequent years, the name of the UK-based Hinduja brothers cropped up. • But in 2000, the Hindujas issued a statement saying the funds received by them from AB Bofors had nothing to do with the howitzer order. • In 2001, two of the accused, former defence secretary Bhatnagar and Win Chadha passed away. • On February 4, 2004, Delhi High Court exonerated Rajiv Gandhi in the case and in 2005, the same court cleared the Hindujas of involvement.

The Bofors Saga • The case lost steam thereafter though on February 6, 2007, Quattrocchi was detained in Argentina on an Interpol lookout notice. • But the Indian Governbment seeking his extradition did not back up the extradition request with details of a key court order which was turned down by the Argentinian Supreme Court. • Many observers feel that this was deliberately done.

The Bofors Saga • On September 29, 2009, the Government of India informed Supreme Court about its decision to withdraw the case against Quattrocchi as he could not be extradited. • Though in the beginning of 2011, an Income Tax tribunal ruled that a commission of over Rs 40 crore in violation of Indian laws was indeed paid to Quattrochi and Chadha in the gun deal. • But on March 4, 2011, a Delhi court, realising the futility of the exercise, allowed the CBI to drop all charges against Quattrochhi and to close the case.

OttavioQuattrocchi • The people of India were shocked to know that over Rs 64 crore was indeed paid to some very powerful people. • At the centre of it all cropped up the name of OttavioQuattrocchi, an Italian businessman who represented the Italian petrochemicals firm Snamprogetti and had reportedly rose to become a powerful broker between New Delhi and international businesses owing to his reported proximity to the Gandhi family..

Operation West End • Yossarian sidled up drunkenly to Colonel Korn at the officers' club one night to kid with him about the new Lepage gun that the Germans had moved in. "What Lepage gun?" Colonel Korn inquired with curiosity. "The new three-hundred-and-forty-millimeter Lepage glue gun,“ Yossarian answered. "It glues a whole formation of planes together in mid-air.“ Catch 22, Joseph Heller Tehelka.com managed to sell the Lepage 90, the ALION and the Krueger 3000 to the Indian defence establishment - ostensibly fourth generation hand-held thermal cameras and, needless to add, non-existent.

Operation West End • The Beginning: • It started with a Senior Section Officer in the MOD, wanting to make some money from arms dealers. • Tehelka.com floated a fictitious arms manufacturing company, based in London, called West End International. • They used a product whose indent existed in the Indian Army and attempted to get an entry into the lowest end of the defence chain and work their way upwards. • After the bribe they are taken to Brigadier Anil Sehgal's house in New Delhi. Sehgal is the deputy director in DGOS, a crucial army procurement post. • Brigadier Sehgal and P. Sashi give us the two things that they needed - a defence product and an entry into the “gravy train”.

Operation West End • According to Tehelka the immediate trigger for starting out on Operation West End was the blast at the Bharatpur ammunition depot on April 28, 2000. • An entire inventory of procurements went up in smoke in this blast. • Given that around this time there had been allegations that inventories of procurements were being fudged, the blast seemed an event suspiciously timed to erase all evidence. • Tehelka claims it then decided to find out what really goes on in the process of defence procurement.

Operation West End • What did it find out? • Tehelka's investigative journalists, posing as arms dealers and having no knowledge whatsoever of defence hardware and procurement procedure, were able to bribe their way up the establishment. • Starting with junior officials and going on to the higher echelons of power,gold chains, bundles of currency, liquor and women proved to be the price of our nation's security. • The nexus between army officials, bureaucrats and politicians. • From assistants to senior generals, minor political functionaries, political bigwigs and defence middlemen handling deals worth thousands of crores.

Operation West End • It provided proof of the existence of middlemen in defence deals, notwithstanding the government ban on "middlemen" following the Bofors scandal. • It highlighted the porousness of the establishment. • Through eight months of investigation, the journalists, representing a non-existent company peddling a non-existent product, operated undetected in the MOD, the Army HQ, and even the residence of the Defence Minister, George Fernandes. • No one ever tried to check back on the representatives of West End International or their supposed products. • The Tehelka journalists were using cars and mobiles that could easily have been traced back to a media office.

Operation West End • It exposed the urgent need for reform in party funding – revealing as it did, how much corruption goes on in the guise of taking money for ‘party funds. • Showcased the rot in the defence establishment. • Army officers, bureaucrats, middlemen, politicians – everyone the Tehelka journalists came in contact with in Operation West End spoke openly, in detail and in familiar terms about corruption in defence deals: whom to contact, how much to pay, what to do. They also refer to specific deals and kickbacks in the past. • the CAG report tabled in Parliament in December 2001 - as well as several CAG reports in the past - corroborate allegations and references thrown up in Operation West End.

Operation West End • Individual acts of corruption: • BangaruLaxman, BJP president, exposed. • He was seen receiving people he thought to be arms dealers and middlemen in his office. • Was seen stuffing a Rs 1 lakh bribe from them into his drawer and asking for the rest to be paid in dollars. • Agreeing to facilitate the sale of a fictitious product to the army.

Operation West End • George Fernandes, then Defence Minister, exposed allegedly misusing office and power. • Implicated on the tapes because his companion and Samata Party president Jaya Jaitly was caught receiving supposed arms dealers and middlemen in his residence and accepting money in exchange for referring a deal to him.

Operation West End • Jaya Jaitly, Samata Party president. • Seen accepting Rs 2 lakh for agreeing to help forward the sale of a fictitious product to the army by referring the matter to her companion, the Defence Minister, George Fernandes.

Operation West End • R K Jain, Samata Party treasurer, giving details of arms deals, admitting to knowledge of rampant corruption and making allegations against key ministers and bureaucrats, including the Defence Minister and his party president.

The two Bs – Bofors & Bangaru