Commentary/Mani Shankar Aiyar
Bofors and the Quattrocchi connection: Does 'Q' lead to 'R' - or 'N'?
(The note I prepared at Sharad Pawar's instance, for the use of
the Congress Parliamentary Party on 'Bofors and the Quattrocchi
Connection' has leaked, I suppose inevitably, to the press. My note for the
CPP is integrally reproduced below:)
It was in the late seventies/early eighties that the army pressed
its need for the induction of a 155 mm howitzer into our armoury.
Negotiations and trials went on for several years before the choice
narrowed down to the Bofors gun. The decisive factor was the acquisition
by Pakistan of heat-finding radar:
This state-of-the-art radar
system could pinpoint the precise location from which a shot had
been fired. Instant retaliation could then knock out the gun.
The Bofors gun had the special feature that it could 'shoot-and-scoot,'
that is, immediately after firing it could swiftly move to another
position.
The Bofors contract, worth some Rs 17 billion, was signed on
March 24, 1986.
Prior to the signing of the contract, there had been a meeting
between Prime Minister Rajiv Gandhi and Swedish Prime Minister
Olaf Palme in New York in October 1985, after which, at the request
of the Indian PM, the Swedish PM personally instructed his foreign
office to officially convey it to Bofors that there should be
no middlemen employed and no commissions paid on the deal.
On October, 13, 1989, the Indian Express and The Hindu published
facsimile documents establishing that on November 15, 1985, more
than two weeks after the Rajiv-Palme meeting in New York, Bofors
entered into a secret written agreement with a UK-based company
called AE Services (run by a shadowy character called Bob Wilson)
in terms of which a commission of 3 per cent of the total value
of the deal would be paid to AE provided the India-Bofors contract
was concluded by April 1, 1986.
The contract was, in fact, concluded one week before the expiry
of the deadline. One receipt of the advance payment on the Bofors
guns from the Government of India, a sum equivalent to 3 per cent
of the advance payment, was paid into the AE Service account with
Nordfinanz Bank, Zurich, on September, 4, 1986. The documents handed
over by the Swiss to the CBI now establish that this payment was
almost immediately transferred into a Geneva account held by Quattrocchi.
He, in turn, seems to have quickly emptied out the account, transferring
the money to an off-shore account in Guernsey, one of the islands
in the English Channel, a well-known tax haven.
The extraordinary thing is that the Indian Express/Hindu documents
of 13/10/89 also establish that the Bofors AE contract was suddenly
terminated on August 8, 1986, and that it was only after the termination
of the contract that the first instalment was paid into the AE
Service account in Zurich about a month later. The key question
is: Why? Why was the AE Service contract so precipitously terminate?
After all, at the time of termination:
AE had fulfilled 100 per cent of its contractual obligation
to deliver the Bofors deal by the deadline of 1/4/86. The
first instalment of its payment amounted to only 20 per cent of
its dues. When AE was still entitled to 80 per cent of its payments,
why did it agree to the termination of its contract?
Note that at the time of the termination of the Bofors-AE Service
contract, there was no public knowledge of any commission having
been paid. News of the payments broke through the now celebrated
Swedish Radio broadcast only on April 16, 1987 -- a full eight
months after the termination of the Bofors-AE contract. Therefore,
it could not have been the discovery of the payments that led
to the contract being canceled. There must have been some other
reason. What was that reason?
In August-September 1986, Prime Minister Rajiv Gandhi was firmly
in the chair with over 400 seats in the Lok Sabha and a three-quarters
majority in the House. The next elections were more than three
year away. If he were the beneficiary of the AE Service payment,
there was no compulsion for him to terminate the account when
it was terminated. What happened in August-September 1986 that
might explain the termination of the Bofors-AE Services contract?
Arun Nehru, minister of state for power, was dropped from
the Council of Ministers at about the time the AE Services contract
was concluded. As a relative of the prime minister, as the member
of the family hand-picked in 1980 to contest the Rae Bareli seat
that Indira Gandhi had vacated when she was elected also
from Medak, Andhra Pradesh, and as a recognised leader of great
influence in party and government circles, the failing out between
Arun Nehru and Rajiv Gandhi was widely commented on
in political circles and the media after Rajiv Gandhi failed
to proceed to Srinagar in April 1986 where Arun Nehru was
recovering from a severe heart attack.
Bofors and AE knew as well
as anyone else that Arun Nehru had ceased to be a person
in good standing in the higher echelons of the ruling party. It
was in this political context that the AE Services contract was
abruptly terminated.
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