1989: Scandal in India

Vino John/The Hindu

 

 

 


N. Ram ’68

N. Ram, former editor-in-chief of The Hindu, was instrumental in breaking the Bofors scandal, a bombshell story about corruption in military spending that brought down Prime Minister Rajiv Gandhi and changed the course of Indian politics.

The Hindu – October 9, 1989
“What secret part of Swedish report reveals
:
Win Chadha ‘principal beneficiary in Svenska’;
‘commission payments’ to ‘those who took care of the Bofors FH 77 deal’”
By Chitra Subramaniam in Geneva and N. Ram in Madras

New documents

The secret part of the Report by the Swedish National Audit Bureau — withheld in 1987 from the publicly released version on account of bank secrecy requirements and published here in facsimile — reveals that Bofors officially admitted to the Swedish National Bank in December 1986 that “the principal beneficiary” behind Svenska Incorporated, one of the three recipient front companies paid secretly in Switzerland, was “an Indian who has been an agent for Bofors for 10-15 years.” This is a clear reference to Mr. Win Chadha, an Indian national and resident who has represented Bofors in India from the Seventies.

The confidential part of the official Report, dated June 1, 1987, also reveals that the privileged material the Audit Bureau studied and the documented and oral information it had access to “confirm that commission payments to business or accounts in Switzerland were made to those who took care of the Bofors FH 77 deal.”

The full or unexpurgated Report of the National Audit Bureau is part of a mass of new documentation on various key aspects of the Bofors scandal — running into more than 100 pages — obtained by The Hindu from authoritative sources in Sweden. A facsimile sample of the Report in Swedish is published on this page, along with the English translation of the secret paragraphs (See page-11 for full text).

This is evidence of a qualitatively new, unimpeachable kind that neither Bofors nor the Government of Sweden nor the Government of India is going to be in a position to challenge. It comes on top of the 100 or so items of documentation published by The Hindu in three instalments in April, June and November 1988. This proves, beyond the shadow of a doubt, that Bofors lied outrageously when it claimed — in oral statements as well as in writing — that “no Indians” had been paid in connection with the winning of the SEK 8400 million howitzer contract with India on March 24, 1986, and that the “winding up” or “termination” costs incurred by it in 1986 had nothing to do either with Indians or with the winning of the contract with the Government of India.

The direct admission was recorded in a session with the Swedish National Bank (the Riksbank, the Swedish equivalent of the Reserve Bank of India) by Mr. Per Ove Morberg, a senior Bofors executive who became acting president of Bofors after the exit of Mr. Martin Ardbo in the wake of various exposures. The Morberg admission of December 18,1986 is recorded in the minutes of the Swedish National Bank and is quoted in the secret part of the Audit Bureau’s Report:

“The current president of A.B. Bofors, Per Ove Morberg, has, in his talks with the Swedish National Bank stated that the principal beneficiary in Svenska Incorporated is ‘an Indian who has been an agent for Bofors for 10-15 years. Whether there were other partners, Morberg did not know. If the Swedish National Bank requires it, exact particulars about any others could be produced, according to M’” (Minutes from visit to the National Bank 1986-12-18).

The date of the Morberg confession is significant. It came after virtually all the percentage payments totalling approximately SEK 320 millions (Rs. 64 crores) had been made into secret Swiss bank accounts. Neither Bofors nor the recipients of the payoffs could have possibly imagined at this point that a mass of internal documents on the “commission” payoffs, and the enabling arrangements for them, would be leaked to the media. Interestingly, the Morberg admission pre-dated the surfacing of the Bofors-lndia scandal by four months. In other words, the Morberg admission belongs to the post-contract, post-payment but pre-scandal period; no “winding up” story features in it for the simple reason that, at this stage, no unwelcome public disclosures had to be neutralised.

In one stroke, this evidence demolishes the conclusion recorded by the Indian Joint Parliamentary Committee in its report of April 1988 that “the question of payments to any Indian or Indian Company, whether resident in India or not, does not arise…” It makes nonsense of the work of the “Investigative Agencies” as reported to the JPC and to Parliament — to wit, especially the endeavours of Mr. Mohan Katre, director of the CBI: “The information available at this stage does not show the involvement of any Indian, residing in India or outside India or any Indian associates in the large payments amounting to 319 million Swedish Kroners.” (JPC report, p. 144). It makes a mess of the claim repeatedly made, in Parliament and outside, by the Government of India — especially by the Prime Minister, Mr. Rajiv Gandhi — to the effect that the Government of India was satisfied that “no Indians” were paid “any commissions” by Bofors in connection with the howitzer contract.

The evidence contained in the secret part of the National Audit Bureau’s Report underlines the fact that the Swedish Government and the Prime Minister, Mr. Ingvar Carlsson, consciously withheld from the Indian and Swedish people authoritative knowledge that the “No Win Chadha”, “No Indians”, “No Commissions”, “Winding Up” story maintained by Bofors and the Government of India from mid-1987 was a piece of sheer fabrication.

Official accomplice

The classified document was presented to the Swedish Cabinet in early June 1987 by Ms. Anita Gradin, the Foreign Trade Minister. The Foreign Minister, Mr. Sten Anderson, repeatedly promised in 1987-88 that the “facts” would come out. In the only detailed interview on the Bofors-lndia affair given to any media representative to date, Mr. Carlsson told V. K. Ramachandran in Stockholm in March 1988 that “it is only Bofors which can give a complete account of its own payments” and since “this is important for Sweden and for them,” his Government had asked Bofors “to give any information they have” (Interview published in The Hindu on March 14, 1988). What Mr. Carlsson failed to say — in response to persistent questions about the credibility of the Swedish arms manufacturer’s “No Indian,” “Winding Up” story — is that he and his Government knew officially from at least June 1987 that it was patently false. The new material The Hindu publishes today establishes, among other things, that official Sweden has been an accomplice in the crisis-management and cover-up efforts by those involved in the Bofors-lndia payoff scandal.

The revelation of the fact that Mr. Win Chadha was “the principal beneficiary in Svenska Incorporated”; that the post-contract payments would have continued to at least 1990 and climbed up to over SEK 770 millions (Rs. 155 crores); and that the percentage “commission” payments carried an admitted link with the considerable achievement of overcoming the stiff competition and winning the SEK 8,400 million howitzer contract with India is in direct and damning contrast to the line developed jointly by Bofors, the Government of India and an assortment of crisis managers of an unofficial kind, especially Mr. G. P. Hinduja.

If the whole interaction from June 1987 between Bofors and the Government of India can be understood by the public in terms of a “fixed” football match in which all the goals scored against India have been ‘own’ or ‘self’ goals (scored into the Indian goal by Indian boots or heads), it is now established that the Swedish official referee. Mr. Ingvar Carlsson, has been an accomplice in the ‘fixing’ of the game.

Deviation from rules

Another important conclusion recorded in the secret part of the Report is that “in the National Audit Bureau’s judgment the commission payments in the circumstances concerning the recipient, mode of payment and other circumstances clearly deviate from existing rules and other foreign payments made by A. B. Bofors in recent years. A. B. Bofors’ own organisation was not used.”

Furthermore, the confidential part of the Report draws material from the official record of the Swedish National Bank to establish that on top of the four payments totalling SEK 188,398,806 (2.24 per cent of the contract value) made to Mr. Win Chadha’s Svenska Incorporated in 1986, Bofors was committed to paying “0.96% of the delivery value to the agent at every delivery of Bofors to India,” which meant instalments of approximately SEK 10 millions in 1987, SEK 20 millions in 1988, SEK 20 millions in 1989 and SEK 10 millions in 1990. Thus the Svenska “entitlement” or “franchise” on the Bofors-lndia howitzer contract value was worth SEK 268.80 millions in all to Mr. Win Chadha, who might have had to distribute some of this to “minor” partners.

Payments halted

The three “entitlements” — two old ones going back to the late-1970s and one new-fangled one carved out in November 1985 — on the contract value were known, according to documented evidence, to total at least SEK 772.80 millions. There can now be no doubt whatsoever that the secret payoffs would have climbed towards this high watermark had the whistle not been blown on the affair in April 1987. The official evidence discovered by the Swedish National Audit Bureau and contained in the secret part of its Report makes this absolutely clear.

Mr. Morberg was a senior executive in Bofors during the presidency of Mr. Martin Ardbo, the man who was most intimately involved with the payments and the enabling arrangements, who in March 1987 lost his job in the wake of a series of Bofors scandals involving various countries and who (in the company of Mr. Hans Ekblom) is currently on trial in Sweden. Along with Mr. Ekblom, Mr. Morberg played a basically unquestioning lieutenant’s role and was very much in the picture so far as the mysterious arrangements for the secret payments were concerned (although an attempt was made to distance him from direct knowledge of the affair in the proceedings before the JPC in September 1987 and in March 1988).

Sensitive talks

When Mr. Morberg became the acting president of Bofors in early 1987, much depended on the information he would be willing or obliged to reveal or conceal. Subsequently, he came twice to India in 1987-88 for highly sensitive, payoff related talks. According to General K. Sundarji’s revelations published in India Today (September 15,1989), Mr. Morberg was due to come to New Delhi at the head of a Bofors delegation in July 1987 to give the information the Government of India “wanted,” before the Prime Minister, Mr. Rajiv Gandhi himself scuttled the idea (leading to the resignation of Mr. Arun Singh, the Minister of State for Defence).

In September 1987, Mr. Morberg and Bofors’ “chief jurist,” Mr. Lars Gothlin, “briefed” an official team comprising Mr. S. K. Bhatnagar, then Defence Secretary, Mr. P. K. Kartha, then Law Secretary, Mr. G. K. Arora, then Special Secretary to the Prime Minister, and Mr. N. N. Vohra, then Additional Secretary in the Ministry of Defence (the team was “assisted” by Mr. T. K. Banerji, then Joint Secretary (Ordnance) in the Ministry of Defence.)

In substance and small print, what Messrs Morberg and Gothlin told the official team — in the confidence that it would not be revealed publicly — was significantly at variance with what Bofors and the Government of India (including the report by the Investigative Agencies contained in the JPC report) were pleased to put out to the public as the “substantial information” gained from Bofors and as “facts.” Internally, in the confidential discussion with the Government of India, Mr. Morberg changed his story on some vital points; this is revealed, most damagingly, in the detailed record of the discussion and in the two-way written communication now available to The Hindu. This important fact, and specifically the discrepancies and contradictions recorded officially in the confidential communication, were “withheld” by the official Indian team and also by the “Investigative Agencies” from the JPC (before which Messrs Morberg and Gothlin testified in September 1987 and March 1988) and from the public. That, of course, is another story which will follow.

When in December 1986 Mr. Morberg was called upon to visit the headquarters of the Swedish National Bank to explain the large and mysteriously coded payments which clearly deviated from the known procedures and practice within Bofors, the event was to prove fateful. This direct admission on the “commissions,” on the details of the actual and future payments and on the Svenska-Chadha nexus was eventually to prove fatal to the “winding up” story — the alibi constructed weeks after the scandal surfaced in Sweden. Among other things, it appears to have triggered the original, morally outraged leak which brought the scandal to the surface on April 16, 1987.

The potentially explosive nature of Mr. Morberg’s confession of December 1986 was clear to the crisis managers within the company virtually from the start. In a confidential note, dated August 31, 1987 (“Memo Regarding Agreements for Representation in India”), which is in the possession of The Hindu, Bofors prepared its senior executives for a line of tough questioning and provided specific “facts,” in summary, on the recipient arrangements. In the section dealing with “Svenska Incorporated, Panama/ A.B. Bofors” and the “winding up” claim, this warning is recorded (after the reference to “86-05-06, 2.24% on advance payments = SEK 188,398,806″): “In this connection may be recalled Per Ove Morberg’s conversation with the Swedish National Bank in December-86.”

A question on the memorable event was raised by the official Indian team in the September 1987 discussion with Messrs Morberg and Gothlin (it was apparently raised by Mr. Gopi Arora, who cited Chitra Subramaniam’s report on the subject from Geneva, published in The Hindu of June 3, 1987). Bofors’ official reply to this question is interesting: “It is true that Mr. Morberg called on the Swedish Central Bank in December 1986 to furnish clarifications in respect of the remittance of SEK 188 million to Svenska Incorporated. The need for these clarifications arose from the allegations of bribes/kickbacks having been paid in Singapore. The Swedish Central Bank had desired to know greater details of the remittance.”

Significantly, the secret part of the National Audit Bureau’s Report, dated June 1,1987, confirms in every applicable detail and nuance the information contained in the mass of documents published, in facsimile form, by The Hindu in 1988 on the percentage payoffs and on the enabling arrangements for the payoffs involving Indians and others. In other words, there is complete internal consistency in the lengthening line of authenticated documentary evidence made available to The Hindu by morally outraged sources in Sweden.

The Marshi link

For example, an attempt was made to deny the link between “Mr. Emil Marshi” and the Tulip-Moresco-Pitco payment track; the doubts were fielded publicly at various points by Mr. Marshi himself, the Hindujas, Mr. Katre, Mr. Rajiv Gandhi (in a magazine interview) and Mr. Chidambaram (in Parliament). The secret paragraph 2b of the Audit Bureau’s Report confirms the “Attn Mr. Emil Marshi” arrangement for the “Tulip” payoff. That is to say, the same Mr. Marshi whose name appears in the documents published in The Hindu (April 22 and June 25, 1987) on the Pitco “entitlement” of 1979 and 1983 and on the “transferred” Moresco “entitlement” of 1984 resurfaces in connection with the “Tulip” payments of 1986 — which were scrutinised, from the bank record, by the National Audit Bureau. The documents (going back to 1982 and 1984) published in The Hindu established this irrefutable link: “Pitco C/o Sangam Ltd.” and “Pitco C/o Mr. G. P. Hinduja. Sangam Ltd.” The authenticity of these documents, along with that of the others referred, was confirmed by Mr. Ringberg in a telex message to Mr. Katre in 1988 (See facsimile of Ringberg-Katre telex communication).

The ascending order of the admission by Bofors on the scale of the clandestine payments is interesting. In April 1987, soon after the sensational radio broadcast, the company admitted in confidence to the Government of India a payment of SEK 32 millions to “a Swiss company”; by September 1987, it was officially clear that the opening admission had understated the scale of the payoff by a mere factor of 10. In May-June 1987. Bofors claimed to the National Audit Bureau that the payments were of the order of SEK 170-250 millions — all “winding up” costs that had nothing whatever to do with the winning of the howitzer contract. At that time, the National Audit Bureau knew that firm, documented arrangements had been made for paying a multiple of the percentage sums which were actually paid in 1986; but it did not quite know that the payoffs in the post-contract period in 1986 had already risen to SEK 320 millions (Rs. 64 crores).

The secret part of the National Audit Bureau’s Report reveals the following detail. While the Svenska-Chadha “entitlement” was virtually an open book even at that time to those Swedish authorities who had privileged access to the information on record, the “Lotus”, “Tulip” and “Mont Blanc” payments were not yet revealed to be on account of the Moresco-Pitco (C/o G.P. Hinduja, Sangam Ltd.) “entitlement” on the howitzer contract value. The secret paragraphs suggest that the National Audit Bureau did not know much about the A.E. Services “entitlement” and payment angle at that juncture.

These angles were to become quite obvious to the investigators who followed up the National Audit Bureau’s solid but incomplete work. The Prime Minister, Mr. Carlsson, was probably being technically accurate when he told The Hindu, in the interview published on March 14,1988 (see box), that “we don’t have any information that we have not given to the police or the Prosecutor.” Moreover, documents that Bofors was obliged to part with under the Swedish laws plus a mass of papers seized during several searches in 1987 gave the police investigators and the Prosecutor, Mr. Ringberg, an exceptionally detailed insight into the agreements between Bofors and the recipient companies, into the nature of the payments, and into the cover-up, crisis management efforts.

A variety of documents — including several revealing diary entries and handwritten notes on the payoffs, the crisis management efforts and the negotiations recorded by Mr. Ardbo in 1987, which fell into the hands of the investigators — reveal the deep nervousness and concern felt by the odd coalition of crisis-managers (based in Stockholm and Karlskoga, London, Geneva and New Delhi) over the dangerous implications of the information recorded or retained by Bofors and the banks involved.

According to the handwritten record maintained by Mr. Ardbo in fascinating and obsessive detail, he, “G.P.H.,” “GP, SP,” “Hansson,” “Bob” (Mr. Bob Wilson of A.E. Services Ltd and Ciaou Anstalt), Mr. Anders Carlberg (executive head of the Nobel group), Mr. Morberg, Mr. Gothlin, “Win” and various others interacted, clandestinely, on the management of the Bofors-lndia crisis. This record reflects a generally sombre mood of nervousness, agitation, anger and, occasionally, complacency and superficial elation.

For example, Mr. Ardbo notes for September 30,1987: “Carlberg phoned and wanted to have a meeting immediately. It concerned India. I called Hansson who was breathing fire and flames over Nobel’s entering (recording) of the Indian deal. I stated quite clearly that I was not into forgery. The contract could go to hell.” This entry was made following the visit to India in September 1987 by Messrs. Morberg and Gothlin to pass on “substantial information” to the Government of India and also depose before the JPC.

For October 13, 1987: “Enquiry with Ringberg; and two policemen. The whole went ok, but I refused to answer concerning names. Evening home to Kkg. Win C called, Met Mats… home. There was also eldh and we heard about the enquiry. In the evening talked with Wilson and Hansson. Hansson scared and agitated in general. Doesn’t believe in Swedes.”

For October 15, 1987, Mr. Ardbo records: “Talked with Sodemark, Planned visit to London. H will not see new faces.”

The Ardbo diary entries and handwritten notes for 1987 provide an insight into a crude and incompetent cover-up strategy where the central story was riddled with inconsistencies and contradictions, quite different things were said to different people at various times, and the alibis tossed up for public consumption were quite unbelievable.

Credible line not pursued

Another thing becomes clear virtually from the start and is evidenced by Bofors’ whole attitude to the enquiry by the National Audit Bureau. On the face of it, fresh acknowledgement of the admitted Svenska-Chadha link and an attempt to explain the SEK 188 million percentage payoff into a secret Swiss bank account as an actual (although from an Indian legal standpoint, illegal) “commission” payment made to a commercial Indian “middleman” would be the minimum expected from Bofors in the interest of maintaining elementary credibility in the defence. Why was this minimum ‘credible’ line not pursued?

The actual behaviour of Bofors, and all the other parties — especially the Government of India and the Prime Minister, Mr. Rajiv Gandhi — makes it obvious that “sacrificing” Mr. Win Chadha by publicly admitting the Svenska-Chadha nexus (which Mr. Katre informally acknowledged to N. Ram of The Hindu in June 1988) was by no means a safe option available on the crisis-management track. The live and present danger of going after Mr. Chadha was compounded by the knowledge that the record showed that the Svenska “entitlement” (legally enforceable through a Bofors-Svenska Agreement which was valid up to September 30,1987) had, in 1985-86, been inexplicably reduced from approximately 6 per cent to 3.2 per cent of the contract value. Mr. Chadha, who had represented Bofors in India as the Sole Representative or agent from 1978 and had evidently worked hard was clearly sold short on his “entitlement.”

It is here that the entry of A.E. Services Ltd — with a new-fangled “entitlement” of 3 per cent that makes no rhyme or reason in any legitimate business sense — becomes extremely significant. For one thing, according to a note sent by Mr. Bob Wilson to Mr. Ardbo’s lawyer on a confidential discussion held on the Ciaou-A.E. Services angle on October 10, 1987, “neither AES nor any of its associated companies had done any work within India prior to 8th March, 1986″ — and the Bofors-lndia howitzer contract was won on March 24, 1986. A.E. Services quite obviously cuts into the deal, very late in the day (November 15,1985), at the expense of an older “entitlement” and is paid for no demonstrable commercial service rendered. The crisis managers were quite aware that A.E. Services Ltd. was a smoking gun, if ever there was one.

What about Pitco-Moresco? Whatever specifics Bofors might have been willing to reveal at the start about the “commission” arrangements and the identities of the recipients and: beneficiaries, the others involved in the scandal could not afford to have the real nature of the Pitco-Moresco “entitlement” exposed — since there was no question of passing this off as a legitimate commercial transaction involving the performance of demonstrable services in return for which “commissions” might have been collected. The Pitco-Moresco “entitlement” the alibi constructed for it, the mysterious role of A.E. Services Ltd., and the major new facts available on these aspects — these constitute yet another story.

To sum up, while the Chadha-Svenska nexus took in payments which might have been linked, although illegally, with some kind of demonstrable service performed for Bofors by its agent in India for a fairly extended period, the facts admitted officially by Bofors plus the small print of the agreements and the payoff arrangements published by The Hindu in June and November, 1988 make it clear that the only visible “service” performed by Moresco-Pitco and A.E. Services Ltd. was providing “safe” clandestine recipient arrangements and some kind of cover for the payoffs. There was no question of any of the three recipient arrangements receiving these big percentage payments had Bofors lost the India contract.

All this fits in perfectly with the original allegation broadcast by the Swedish National Radio on April 16, 1987 and also with what is on record in Mr. Ardbo’s interrogation sessions with the Swedish police investigators. In a report published in The Hindu of April 8,1988 from Geneva, Chitra Subramaniam quoted the key Swedish police investigator looking into the Bofors-lndia deal as telling her: “Martin Ardbo told me that if Bofors ended the relationship with the agents, then they, (the company) would not have got the contract.” The former president of Bofors was also quoted as saying that he and Bofors had been made “scapegoats” to protect the “big people.”

Mass of evidence

With a mass of unimpeachable documentary evidence in addition to a great deal of other material information in hand, the various aspects of the journalistic investigation of the Bofors-lndia payoff scandal can now be seen and judged as a coherent, internally consistent whole. A bona fide official investigation in India, backed by legal proceedings, could have got to these facts much quicker and brought those responsible swiftly to justice. As it stands, the authenticity of all the documents, without exception, which were referred by the Director of the CBI, Mr. Katre, to the Swedish Prosecutor, Mr. Ringberg, has been confirmed in a telex communication dated October 20,1988 (acknowledged belatedly and in a grudging way by the Minister of State for Home Affairs, Mr. Chidambaram, in Parliament in 1989). The question now is how long the Government of India is going to take to “verify” the authenticity of the secret part of the National Audit Bureau’s Report and other new documentary material available to The Hindu.

The crisis-management of 1987-88 is a story of conspicuous incompetence, of more or less uninterrupted failure. The cover-up collapsed quite a while ago, even if the fact has not been admitted officially. It would be no exaggeration to note that knowledge of the secret paragraphs of the Swedish National Audit Bureau’s Report is the final nail in the coffin of the “winding up” story — the centrepiece of the cover-up strategy.

Rajiv Gandhi on Bofors payments

On April 27,1987, the Prime Minister claimed in New Delhi that the negotiations for the Bofors 155 mm guns had been “meticulously handled” with “all middlemen and non-governmental agents ruled out.”

* * *

On October 9,1987, Mr. Rajiv Gandhi, answering a question in an interview with the BBC recorded in New Delhi, claimed that “to the best of my knowledge, there have been no payoffs to Indians.” He added that Bofors had actually given more information than “we thought we would be able to get.”

* * *

On January 19, 1988, he said in another interview: “We believe that no Indian has been paid in this deal. We have been assured that no Indian has been paid. I am talking about the Bofors business. There is a parliamentary committee looking into it. We hope the report will be in by February and we will be able to track down whoever has taken any money on this. But the feeling that I get is that we are not going to find any Indian; there may be others.”

* * *

In other words, at three stages in the development of the Bofors scandal, the Prime Minister, Mr. Rajiv Gandhi, pre-empted the sensitive investigation by expressing his “view” that neither “commissions” nor “middlemen” nor “Indians” were involved.

2 Comments

  1. Posted 04.25.12 at 7:57 am | Permalink

    The Bofors ghost rises from ashes again. The Congress party cannot bury it so easily. Thanks to whistle-blower.

  2. Ranjitha
    Posted 04.27.12 at 12:25 pm | Permalink

    Chitra Subramaniam broke the story work. Only mentioning N Ram in the blurb is misleading. Especially since, The Hindu bowed down to government pressure and stopped publishing the stories. Subramaniam moved on to the Indian Express to continue reporting on the matter.

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