The AgustaWestland Chopper Deal

The AgustaWestland Chopper scam:

Aptly dubbed by the media and the press as the Chopper or the Choppergate Scam, is yet another instance of defense perpetrated scam, involving the procurement of a fleet of twelve AgustaWestland AW101 helicopters, intended for delivering VVIP duties for the President of India and other important officials of the nation, who are privileged with helicopter sorties. Beginning of last year (2013), an Indian Parliament monitored investigation was launched into the said scam, whereupon several high ranking defense personnel and of course a number of Indian politicians were accused of corruption and indicted for accepting bribes from the helicopter manufacturing companies, for swinging the alleged AgustaWestland deal worth INR 36 billion (USD 550 million). As of 25th March, 2013, Defense Minister AK Anthony had acceded to the allegations in his statement, “Yes corruption has taken place in the helicopter deal and bribes have been taken. The CBI is pursuing the case very vigorously”.

AgustaWestland NV is essentially a helicopter designing and manufacturing multinational, in a joint collaboration of UK and Italy and an auxiliary unit of Finmeccanica. The AgustaWestland was a result of the amalgamation of the chopper manufacturing ancillary units of Finmeccanica (Agusta) and GKM (Westland), with each of parent companies holding a 50% stake in the resultant chopper subsidiary. In 2004, Finmeccanica bought out GKM’s stake in AgustaWestland, after which the helicopter manufacturing company became a wholly owned subsidiary of Finmeccanica.

Results of investigations into the scam:

The trials into the alleged corruption had begun on 17th July, 2013, while the Ministry of Defense and the CBI had agreed upon dispatching a joint team to Milan, to monitor the ensuing habeas corpus. The CBI, as described by Defense Minister A K Anthony, had been pursuing the investigations ‘vigorously’, and had already been successful in nailing the ex – IAF Chief S P Tyagi along with his three cousins and nine other individuals including the companies, AgustaWestland and Finmeccanica, and the European broker who had engineered the deal. The indicted individuals were accused of perpetrating a corruption through the acceptance of a bribe amounting to a total of INR 362 crores in swinging the chopper deal.

While the Italian prosecution counsel had already submitted its final investigations reports with the legal authorities, with the trial supposed to commence from July 19th, 2013, the CBI had impeached the European broker Guido Haschke for using his Tunisia based company Gordian Services Sarl, as a front for the furnishing of a number of allegedly distorted advisory arrangements with AgustaWestland and the accused Tyagi brothers, (cousins of the indicted ex – IAF Chief). Using such arrangements as a façade, Haschke had been accused of making subsequent under the table payments amounting to 1.26 lakh Euro and 2 lakh Euro to the Tyagi brothers, on two separate occasions. The CBI had also completed framing of Letters of Rogatory for four other countries who are also seemingly interested in this disputed deal. Previously, the Italian Counsel were seeking an immediate prosecution of the former CEO of Finmeccanica, one Giuseppe Orsi and the CEO of AgustaWestland, one Bruno Spagnolini, without getting into the complications of preliminary court hearing procedures. Both Orsi and Spagnolini had been accused of corruption and invoice frauds. The Italian State- controlled defense giant Finmeccanica, employing 70,000 people worldwide, had also come under the scrutiny of investigative agencies in Italy and India for its involvement in the alleged chopper scam.

The CAG findings about the scam:

Disagreeing with the CAG reports on the scam, Jackie Calicut, the representative of the Indian counterpart of AgustaWestland, had issued a counterstatement in a written communication to the CAG Shashikant Sharma, in which it had been claimed that, the adjustments in the cabin height dimensions from 1.45m to 1.8m did not lead to the disbarment of any functional aircraft, as furnished in the CAG report. In another written communication to the Air Headquarters in 2005 the chopper company had further added, “The cabin height requirement of 1.8m did not lead to ejection of any competing aircraft. All aircrafts met or exceeded this requirement”.

The CAG report, however, had trounced the Defense Ministry and the Air Force, citing ‘several instances’ of departure from the standard procedures of purchasing of VVIP helicopters in the AgustaWestland deal that was signed in 2010. As mentioned in the CAG report, “……fact remains that by making the cabin height of 1.8m a mandatory requirement, the competition was restricted, resulting in a single vendor situation”, which is in stark contradiction of the AgustaWestland Indian counterpart claims, that the cabin dimension specifications of the tender had indeed created a multiple vendor situation. Also the CAG report had pointed out one serious breach of contract by the chopper company. The flight trial assessments were demonstrated using ‘representative’ versions of the AgustaWestland choppers and not by the corresponding military versions. To this AgustaWestland had responded that actual aircrafts that are in use by the armed forces of the UK had been provided for the demonstration. The conclusion of the CAG report that the model AW 101 was still in a developmental state and did not exist in reality was the reason as to why the company had used representative versions for demonstrations to the IAF, was also met with vehement disagreement from the helicopter company. They had emphasized that, “AW – 101 is not an aircraft still under development. AW – 101 entered service in 1999; it is deployed with 16 operators in 12 countries and is battle proven in conflict zones from Bosnia to Afghanistan”. The CAG report had also indicated that the considerable deviations from the observed mandates as allowed by the IAF in the trial flights of the S – 92 and the AW – 101 helicopters were in a direct defiance of the instructions issued by the Defense Minister A K Anthony.

While Ms. Calicut, through her letter, had proffered further technical support to assist the evaluation procedures, which also had included attachments in the form of written communications dating back to 2005, between the Technical Manager (Land Systems) of AgustaWestland and Air Vice Marshal Rajesh Lal, which had ascertained that the Italian choppers could undergo modifications to make them functional at a level of 6000 m, the fact remains the whole deal had become uncertain with the unearthing of the dubiety and the distortions involved in the contract. As of 17th June, 2013, AgustaWestland was on the brink of losing the contract altogether and the situations had worsened with the arrest of the CEOs of Finmeccanica and AgustaWestland in Italy.

Efforts on the part of AgustaWestland to reinstate the deal:

As of 20th November, 2013, AgustaWestland, on the verge of losing the contract with India, had evoked the settlement of dispute clause of the contract as a last measure to prevent the said deal from slipping through the fingers, and had appointed ex – Supreme Court Justice B N Srikrishna to handle the arbitration end of the case. Srikrishna, along with a team of officers from the Italian chopper company had sought a meeting with the Ministry of Defense (MoD), in an effort to iron out the wrinkles in the contract. The stand of the Defense Ministry had proved to be irrevocable, on the ground that the company had violated the pre – contract candor agreements that had been mutually consented upon between the MoD and its vendors, and under such circumstances the MoD had strongly demurred to consider any arbitration issues. Such actions of the MoD had been in congruence with the opinions of the Defense Minister A K Anthony, as made evident from his statement, “There is no question. Our stand is clear that there is no issue of arbitration. We have already given them a show – cause notice and they have not replied so far. Let them reply. We will take a decision after they reply”.

Conclusion – Official cancellation of the deal:

As of January 2nd, 2014, the UPA II Government, in a rare display of denouncing corruption and in all probabilities, a pre – election vote bank pleasing gimmick, had abrogated the Agusta Westland Chopper deals. Technically the contract was put in cessation in February, 2013 following the bribery allegations of Rs 360 crores. Meanwhile, India had advanced 30% of the payment and three of the helicopters had already been delivered. But after the arrest of Orsi in Italy, who incidentally was the CEO of Finmeccanica, when the deal was formally penned between the two countries, the Government took the decision of not furthering any more payments and the formal annulment of the contract.