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Wednesday, 13 February 2013

From Today's Papers - 13 Feb 2013
Ex-Air Chief Tyagi was bribed to swing chopper deal, Italy probe report says
Italian investigators Tuesday alleged that business conglomerate Finmeccanica bribed S P Tyagi when he was chief of the Indian Air Force to swing the controversial AgustaWestland VVIP chopper deal in favour of the company.
The allegation is made in a preliminary inquiry report of the suspected corruption in the Rs 3,546 crore deal filed by prosecutors in Italy on Tuesday.
The 64-page report, filed in the tribunal of Busto Arsizio city for the arrest of Finmeccanica CEO Giuseppe Orsi, gives details of the case being investigated by Italian prosecutors and alleges that the then air chief, S P Tyagi, was instrumental in swinging the deal and was paid — "certain amount of money, not yet quantified" — through intermediaries.
Several attempts to reach Tyagi for his comment were not successful.
Last October, when The Indian Express had reported that Julie Tyagi, an Indian businessman named by Italian prosecutors in the alleged kickbacks probe, was closely related to S P Tyagi, the former air chief had confirmed to the newspaper that he was related to Julie but had also said they had no business links.
This is the first time that a service chief has been named in a probe into alleged corruption in the procurement of defence systems.
The report, a copy of which is with The Indian Express, alleges that technical requirements for the contract were tweaked by India to allow the AgustaWestland chopper enter the bidding process and that kickbacks of 51 million euros (about Rs 370 crore) were paid in Italy and India.
The Italian report names three brothers — Julie Tyagi, Docsa Tyagi and Sandeep Tyagi — as the Indian intermediaries who allegedly got kickbacks and passed it on to Indian officials. It says Finmeccanica's Orsi and alleged middlemen Guido Haschke, Carlo Gerosa and Christian Michel facilitated the payments to India.
Julie Tyagi is the Indian businessman who had been named in October as a relative of S P Tyagi.
"They promised and managed to pay, through brothers Julie Tyagi, Docsa Tyagi and Sandeep Tyagi, a certain amount of money, not yet quantified, to Air Chief Marshal Shashi Tyagi, Chief of Staff in the Indian Air Force from 2004 to 2007 - a public officer or anyway in charge of functions and activities equivalent to those of a public officer in India - to perform and for having performed a deed against his office duties," the report says.
The report also named Britain-based consultant Christian Michel as the other major middleman in the deal. It alleges that Michel was paid a "total amount of about 30 million euros, partly destined to support the corrupt activity meant to bag the order and partly to implement the contract".
The report discusses the Indian contract in detail and alleges that technical requirements were tweaked to ensure that the Italian chopper qualifies. As first reported by The Indian Express, the service ceiling requirements for the contract were changed by the Defence ministry before the tenders were issued in 2006, giving AgustaWestland a chance to qualify.
"Haschke and Gerosa, through the Tyagi brothers, in turn through their cousin Shashi Tyagi managed first to change the tender details, in a favourable way to AgustaWestland, modifying the 'operational ceiling' from 18,000 ft to 15,000 ft of altitude, thus allowing AgustaWestland (which otherwise could not have even submitted an offer) to take part in the tender," the report says.
It alleges that the flight trials were also tweaked. The trials were conducted after Tyagi retired in 2007.
"Then they managed to introduce a comparative flight trial with non-functional engine, thus facilitating AgustaWestland helicopters, the only ones which had three engines. In this way, they managed to get the contract to AgustaWestland," the report says.
CBI to probe VVIP copter deal
Defence Ministry orders inquiry after CEO of Italian helicopter maker held on graft charges
Tribune News Service

New Delhi, February 12
The arrest of the Chief Executive Officer (CEO) of aerospace giant Finmeccanica in Italy on graft charges today prompted the Defence Minister AK Antony to order a CBI probe into Rs 3,500-crore helicopter deal with the manufacturer.

India had placed an order of 12 copters for VVIP use with AugustaWestland, a subsidiary of Finmeccanica. The multicore deal was signed in February 2010. The first lot, comprising three copters, was delivered in December last year while the remaining nine would be delivered in batches by March 2014.

“Future deliveries will depend on the outcome of the CBI probe and the Ministry of Defence could evoke the integrity clause to stall the deal while imposing penalties on the maker,” top MoD sources said. The next batch of three choppers is arriving in June this year, followed by another batch in December and the last one in March 2014.

Defence Ministry spokesperson Sitanshu Kar said: “The contract signed with Augusta Westland includes specific provisions against bribery and the use of undue influence as well as an integrity pact. Since no specific input has been received so far from the two governments (UK and Italy), the MoD has decided to refer the case to the CBI for inquiry”. Under the integrity pact, the MoD could forfeit the bank guarantees furnished by the copter-maker.

The copters supplied by Augusta would be a part of the IAF’s Communication Squadron, which ferries the President, the Prime Minister and other VVIPs. So far, the Russian-built Mi-17 is used for VVIP duties.

“Giuseppe Orsi, the head of Italian defence and aerospace giant Finmeccanica, was arrested on Monday in relation to a probe into international corruption. He is suspected of involvement in the payment of bribes regarding the sale of 12 helicopters by Finmeccanica's subsidiary AugustaWestland to the Indian government," Italian news agency Ansa said. Orsi, the CEO of Finmeccanica, was at the helm of AugustaWestland when the deal was struck and he is suspected of involvement in the payment of bribes. Prosecutors suspect that around 50 million euros (Rs 362 crore approximately), about 10 per cent of the deal were ploughed back into kickbacks to ensure AugustaWestland won the contract, the agency reported. The Italian firm had won the bid beating American chopper maker Sikorsky. The BJP today said it has been raising the issue of financial irregularities in the VVIP helicopter deal for the past one year and insisted that the Congress-led UPA government must give an explanation about the reported anomalies. After the arrest, the Italian firm said in a statement: "Finmeccanica expresses support for its chairman and CEO, with the hope that clarity is established quickly, whilst reaffirming its confidence in the judges."

The deal has been under the scanner for more than a year now after Italian media reports suggested the arrest of two alleged middlemen in Europe for paying bribes to secure it. In December 2012, Defence Minister AK Antony told Parliament that there were allegations of bribery in a deal to procure VVIP helicopters from Augusta Westland, but no formal inquiry has been ordered into the case due to lack of “specific information” so far. “If any wrongdoing is found in the case, suitable measures will be taken by the ministry,” he had said.
Flying into trouble

    Giuseppe OrsiGiuseppe Orsi (in pic), the CEO of aerospace giant Finmeccanica, was arrested in Italy on graft charges
    India had signed the Rs 3,500-cr deal in February 2010 with AugustaWestland, a subsidiary of Finmeccanica, for delivery of 12 helicopters for VVIP use
    Prosecutors suspect that Rs 362 crore, about 10% of the deal, were ploughed back into kickbacks to ensure AugustaWestland won the contract
    The copters supplied by Augusta would be a part of the IAF’s Communication Squadron, which ferries the President, the Prime Minister and other VVIPs
Defiant N Korea conducts ‘miniaturised’ N-test; sends US a message
Seoul, February 12
North Korea today staged its most powerful nuclear test yet, claiming a breakthrough with a “miniaturised” device in a striking act of defiance to global powers, including its sole patron China.

The communist state said it had staged its third test with a “successful” underground detonation, in a riposte to what it said was US “hostility”.

Its claim of miniaturisation suggests that it is a step closer to fitting a nuclear warhead onto a ballistic missile.

The confirmation from North Korean news agency KCNA came nearly three hours after seismic monitors detected an unusual tremor in the area of the country’s Punggye-ri nuclear test site, close to the Chinese border.

Analysts said the timing appeared to be an attention-grabbing calculation from a state well versed in provocative acts, coming just ahead of US President Barack Obama’s State of the Union address at the start of his second term.

North Korea’s two previous tests in 2006 and 2009 triggered waves of UN sanctions, and the Security Council was set to meet in emergency session this morning in New York in response to the third detonation.

There was no immediate response from US or Chinese leaders, but Beijing had made its displeasure clear to the youthful Kim Jong-Un’s regime in Pyongyang, a UN diplomat said.

“The Chinese gave the North Koreans a strong warning against carrying out a test as it became apparent that it was imminent,” said the diplomat, speaking on condition of anonymity, labelling the test “a big challenge to the Chinese”.

The test drew condemnation from Japan and UN chief Ban Ki-moon. The United States said only, via the office of the Director of National Intelligence, that its spy agencies were evaluating a “seismic event” in the Stalinist state. — AFP

North warns of ‘second and third measures’

North Korea said its test was merely its “first response to US threats”, warning that it will continue with "second and third measures of greater intensity" if the US maintains its hostility.
Suggestions on border security by J&K, North-East worth exploring, says PM
Tribune News Service

New Delhi, February 12
Noting a sign of improvement in the internal security situation during the last year, Prime Minister Manmohan Singh today earmarked suggestions from the Governor of Jammu and Kashmir on coherent action by security agencies as worth exploring. Suggestions on border development by those from the North-East would also be factored in by the government.

In his address during the concluding session of the two-day Governors’ Conference presided over by President Pranab Mukherjee, Manmohan Singh made it a point to underscore that he paid particular attention to J&K Governor NN Vohra’s suggestion “for more coherent action on the part of security agencies”. “I think (the suggestions) are well worth exploring,” he said.

Similarly, suggestions by Arunachal Pradesh Governor JJ Singh about border roads, porter tracks and suspension bridges, and by others from the North-East to fence the Indo-Bangladesh border would be examined by the Defence and Home Ministers, the PM said.

On Left Wing extremism, he said steps under the integrated action plan in 82 districts had helped contain geographical spread of the menace. About the recent incidents along the Line of Control, he said what happened was against norms of civilised behaviour and it was unacceptable to India.

In order to meet security challenges, the capabilities of the armed forces and the police were being constantly strengthened, he said. The government was also undertaking infrastructure development programmes in border areas to enhance mobility as well as connectivity, he added.

Turning to the considerable slowdown in the economy over the past two years, he said it was imperative to do everything possible to reverse the trend. At the same time, he told the Governors while the Centre was taking steps, much depended on the investment climate in the states.

On Delhi gang-rape incident, he said an important aspect was to sensitise police in dealing with crimes against women, children, Scheduled Castes, Scheduled Tribes and weaker sections of society. He urged the Governors to guide the governments in their respective states in recruiting more women in the police force.
Major gets 3-yr jail for contact with US woman
Vijay Mohan/TNS

Chandigarh, February 12
A general court martial (GCM) today cashiered an Army Major and sentenced him to three years rigorous imprisonment after finding him guilty of unauthorised contact with an American woman and accepting money from her.

The GCM, presided over by Col Rajwant Singh, Deputy Commander of an infantry brigade, had tried the officer, Maj Saurabh Saharan, on five charges under provisions of the Army Act read in conjugation with the Official Secrets Act and the Prevention of Corruption Act, sources said.

While the GCM acquitted the officer of one charge pertaining to communicating information in relation to the military affairs of the government which might be directly or indirectly useful to the enemy, he was held guilty of the other four.

The other charges include improperly contacting a US national, Nancy Chapman in violation of standing instructions on contact with foreign nationals. Sources said the woman, who had also deposed before the GCM during the course of the trial, is staying in India for the past several months on a business visa and is associated with jewellery designing. It was on the basis of her complaint over some alleged financial misdemeanor on the part of the Major that led to the Army instituting a court of inquiry.

The other charges include accepting a sum of about Rs 17.5 lakh from Chapman, possessing assets disproportionate to known sources of income and making false statements in regard to his travel claims.

The GCM’s findings and sentence are subject to confirmation by the court’s convening authority.
Bribe charges hit Italian helicopter deal, govt orders CBI probe
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 around the President, PM and other Indian dignitaries.

This was 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 Prime Minister, and the Indian Air Force (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.

Antony had then publically 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-metre was later reduced to 4,500-metre. 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 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 (moD) 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 major helicopter contract that is to be discussed by the Antony-led Defence Acquisitions Council on Wednesday. This long-delayed contract is for the joint Army-IAF procurement case of 197 new light-utility helicopters for over Rs 3,000 crore, with Russian Kamov Ka-226T pitted against Eurocopter AS 550 C3 Fennec.

This acquisition has been on the hold for months due to complaints of technical deviations during the flight evaluation trials. Interestingly, the Italian authorities probing the VVIP chopper contract have claimed that an Indian Army brigadier had demanded a $5 million bribe to swing the 197-chopper deal for AgustaWestland in January 2010. AgustaWestland, however, had crashed out of the race later.
India bought helicopters Obama rejected as ‘costly’
NEW DELHI: US president Barack Obama had found a variant of the AW-101 helicopters too exorbitant to pass muster in 2009. But the Indian government had no such qualms while inking the Rs 3,546-crore deal for 12 plush AW-101 helicopters just a year later in 2010.

The American "Marine One", the call sign of the US Marine Corps helicopter which ferries the US President, would of course have been much more high-tech and "souped-up" helicopter compared to the Indian variant.

Obama had shot down the Marine One project, under which the US Navy was to have acquired 28 helicopters, after cost escalations had taken the overall cost to over $13 billion in June 2009, as per some estimates.

Money, instead, was invested to upgrade the existing US Presidential helicopter fleet. 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".

Three of the 12 AW-101 choppers contracted by India — eight in VVIP configuration and four in non-VVIP - have already been inducted in the IAF's elite Communication Squadron, which ferries around the President, PM and other VVIPs, at the Palam airbase. They are slated to replace the ageing Russian-origin Mi-8s and Mi-17s being currently used to fly VVIPs within the country.

Indian VVIPs have been getting plush new aircraft and helicopters to travel in style and security over the last decade. The AW-101s, for instance, have robust self-defence systems like missile-approach warners, chaff and flare dispensers and directed infra-red electronic counter-measures to protect VVIPs on board. In the VVIP configuration, they ferry only 10 passengers instead of the usual 40.

Another concern of the Special Protection Group (SPG), which provides proximate security to the PM, was the helicopters have "a high tail boom" to allow cars to come right next to the rear exit staircase without "exposing" VVIPs to a threat from anyone in the vicinity.

Earlier, India had inducted five mid-sized Embraer 135BJ Legacy jets, under a Rs 727-crore deal in September 2003, and three Business Boeing Jets (BBJs), under a Rs 937-crore contract in October 2005, for the travel of VVIPs. The BBJs also have advanced self-protection suites to guard against missiles and other threats. While the Legacy jets replaced old HS-748 Avros with the Communication Squadron, the BBJs substituted the two 737-200 aircraft bought in 1983.

Major defence scams

Jeep Scandal: One of the first scandals to hit independent India, and definitely the country's first brush with allegations of impropriety in defence procurement. In 1948, Indian high commissioner in Britain V K Krishna Menon was accused of bypassing procurement protocols to sign a deal worth Rs 80 lakh to buy 155 jeeps from the UK. Many also alleged they were second-hand jeeps. Government did not permit a judicial inquiry. Menon went on to become India's defence minister.

Bofors Scandal: The most infamous of all defence scandals the country has seen. Allegations emerged in the late 1980s that there were kickbacks in the purchase of Bofors guns from Sweden. Several high profile individuals figured among the accused, the investigations went on for many years and finally ended in a whimper. It brought down the fortunes of the young Rajiv
HDW Scandal: Allegations emerged in 1987 that the German defence firm had paid a commission for the purchase of submarines by India, in the early 80s. Former Navy chief and one of the architects of the 1971 war, Admiral S M Nanda, was among those raided. The CBI closed its investigations, failing to find any evidence of the alleged payment of bribes.

Tehelka Tapes: Two reporters who went around as representatives of a fake defence firm recorded many key political leaders, military officers and civil servants talking in detail about how bribes were paid in defence deals. Defence minister George Fernandes had to resign after his party's treasurer boasted in the tapes about collecting bribes along with Jaya Jaitly from arms dealers. Specific evidence emerged of paybacks in purchase of Barak missiles from Israel, upgunning of artillery guns etc. No major breakthrough in CBI investigations until today. It has closed at least one of the cases without any evidence.

Denel Scandal: Allegations emerged in South Africa that Denel, a government-controlled firm which had supplied anti-material rifle to Indian Army, had paid bribes to middlemen for the Indian contract. Chargesheet yet to be filed.

Sudipto Ghosh Scandal: In 2009, the CBI arrested the just-retired chief of Ordnance Factory Board Sudipto Ghosh and several of his associates for fixing contracts of OFB. After CBI found evidence of bribery, the government in March 2012 blacklisted six companies for 10 years -- Singapore Technologies, Israeli Military Industries, Germany's Rheinmetall Air Defence, Russian firm Corporation Defence, Indian firms T S Kisan & Company and R K Machine Tool.

Abhishek Verma Scandal: The son of former members of Parliament is in jail, and he and his wife are accused of stealing defence secrets and accepting bribes from defence firms. Investigations are continuing into the affairs of Verma, who may have also had a role in the VVIP helicopter deal.
India’s Defense Deals Now Face Delay
The Finmeccanica bribery issue comes at a time when India is on the cusp of finalizing a contract with Dassault Aviation S.A. AM.FR 0.00% of France to purchase 126 Rafale fighter jets in a deal estimated at more than $10 billion. The acquisition of the Rafale jets is part of an Indian Air Force plan to buy up to 400 planes and helicopters until 2022, air force’s chief, N.A.K. Browne, said last week.

The Indian Army is also in the process of acquiring new tanks, artillery guns, missile batteries and machine guns, while the Navy is upgrading its fleet with new frigates and submarines.

India’s defense sector has been plagued by bribery allegations. The most intense was the Bofors scandal in the 1980s, involving the purchase of Swedish-made artillery guns, which was widely seen as the reason for the electoral defeat of then-Prime Minister Rajiv Gandhi of the Congress party in 1989.

Nidhi Goyal, Director, Deloitte Touche Tohmatsu India Pvt. Ltd. said the arrest of the Finmeccanica chief executive will likely delay the ongoing acquisition of weapons in India as the government probes the allegations.

“Definitely, there will be questions in Parliament and there will be more reviews of defense deals. Deals will now take more time,” Ms. Goyal said by phone. She said the Finmeccanica episode will affect Indian and foreign defense companies as it will “lead to a further slowdown” in the awarding of defense contracts in India.

Delays will likely rankle the armed forces, which have been urging the government to increase defense spending to modernize the country’s Soviet-era equipment as neighbors China and Pakistan also upgrade their military capabilities.

A slowdown in defense purchases will also affect aerospace and defense companies worldwide who are betting on India’s plans to spend tens of billions of dollars each year to buy new military equipment. Already, last week, India’s defense minister A. K. Antony said the defense budget for the ending March 31 has been cut due to a slowdown in the Indian economy.

Mr. Antony didn’t disclose the size of the cut but said that purchases of vital military equipment such as fighter jets won’t be affected by the decision.

New Delhi has earmarked 1.93 trillion rupees ($35.7 billion) for defense for the year to the end of March. India will become the fourth-largest defense spender in the world by 2020, behind the U.S., China and Russia, surpassing France, Japan and the U.K., consultant IHS Jane’s said last week.

It predicted that India’s defense spending will reach $65.4 billion in 2020 despite the budget cuts announced by the defense minister.

“India continues to be a major market for the international defense industry, with major investments in all three services and its strategic missile forces,” said James Hardy, Asia-Pacific editor at IHS Jane’s.

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