The great Indian VVIP helicopter scam

Italian police arrested the head of defence group Finmeccanica SpA on 12 February 2013 on a warrant alleging that he paid bribes to win an Indian contract, adding to a wave of corporate scandals shaking Italy before a general election.

Prosecutors accused Chief Executive and Chairman Giuseppe Orsi in the arrest warrant of paying bribes to intermediaries to secure the sale of 12 helicopters in a 560 million euro deal when he was head of the group's AgustaWestland unit.

What is the $750 million VVIP chopper deal scam all about?
The Indian defence ministry ordered a CBI probe into the $748 million (Rs 4,040 crore by today’s exchange rate) deal for 12 VVIP AugustaWestland helicopters following arrest of its Italian manufacturer Finmeccanica's chief on graft charges in the contract.

This is not the first time that the allegations have surfaced and ironically enough, three of the helicopters have already been delivered to the Indian Air Force, the first of them in December 2010.

Some 30 per cent of the contracted amount has already been paid and the remaining would have to paid as and when the remaining nine machines are delivered, as of now, no wrongdoing has been proved.

In fact, a scale model of the helicopter had formed part of the IAF tableaux during this year's Republic Day parade.

What are the moneys invovled?
The VVIP chopper deal was for $748 million (Rs 4,040 crore) and Italian prosecutors say that the company – Anglo-Italian firm AugustaWestland – paid kickbacks to the tune of Euro 51 million (Rs 370 crore).

What is the scam all about?
Finmeccanica Chief Executive and Chairman Giuseppe Orsi was arrested over bribes allegedly paid to secure the sale of 12 helicopters to India, when he was head of the group's AgustaWestland unit, a judicial source with direct knowledge of the situation told Reuters.

Police were searching Orsi's home and the offices of AgustaWestland close to Milan, a source close to Orsi's lawyer said. The Milan offices of state-owned Finmeccanica, Italy's second-biggest corporate employer after Fiat Spa, were also searched, the judicial source said.

An Indian defence ministry source said kickbacks worth Rs 40 million allegedly paid to Indian officials to grease contracts for Finmeccanica were being probed and that Delhi was considering the deferral of the Finmeccanica helicopter deal, worth 560 million euros.

Highlighting the political sensitivity of the Finmeccanica case ahead of national elections on February 24 and 25, Prime Minister Mario Monti said the Italian government would deal with management issues at the company.

"There is a problem with the governance of Finmeccanica at the moment and we will face up to it," Monti told RAI state television.

Orsi, a long-serving defence industry executive, has always denied any wrongdoing with regard to the corruption probe, which has been going on for a year.

In a brief statement, Finmeccanica expressed its support for Orsi and said it hoped his legal position could be clarified as soon as possible. Its business was operating as normal in the meantime, the company added.

Concern has been growing that the corruption probes could tarnish Finmeccanica's reputation and distract management while the company is carrying out a tough restructuring.

Being excluded from the growing Indian market could be a major headache for the group, which faces defence budget cuts in its main Italian, British and U.S. markets.

Under Indian defence procurement rules, companies found to have been involved in corruption can be punished with blacklisting and fines, an Indian defence ministry source said.

Explaining the rationale for the CBI probe, a defence ministry statement said: "Press reports have appeared from time to time on the subject of Italian prosecutors having initiated a probe into the alleged unethical dealings of M/s. Finmeccanica, Italy. The probe had been widened to include the Indian contract signed with M/s. Augusta Westland."

"In view of the media reports" the defence ministry, through the external affairs ministry, "had sought information from the governments of Italy and UK. No specific inputs were, however, received substantiating the allegations".

CBI to probe AugustaWestland VVIP chopper deal
Explaining the rationale for the CBI probe, an Indian defence ministry statement said: "Press reports have appeared from time to time on the subject of Italian prosecutors having initiated a probe into the alleged unethical dealings of M/s. Finmeccanica, Italy. The probe had been widened to include the Indian contract signed with M/s. Augusta Westland."

"In view of the media reports" the defence ministry, through the external affairs ministry, "had sought information from the governments of Italy and UK. No specific inputs were, however, received substantiating the allegations".











































Since no specific input has been received so far from the two governments, MoD (ministry of defence) has decided to refer the case to CBI for inquiry," the statement added.

Tender twisted to favour AgustaWestland
Three brothers with family ties to a former head of the Indian air force helped to twist rules in a helicopter tender won by Italy's AgustaWestland, prosecutors alleged in an arrest warrant for a top Italian businessman.

Italian prosecutors said that two managers at AgustaWestland, a unit of defence group Finmeccanica, paid go-betweens to help it win the 2010 contract to supply 12 helicopters to India.

Part of these payments ended up with the three Indian brothers, Juli, Docsa and Sandeep Tyagi, whose cousin Sashi Tyagi was former Indian air force chief. None of the Tyagis has been accused of wrongdoing by officials in India.

Prosecutors in the northern Italian town of Busto Arsizio, near AgustaWestland's headquarters, said former chief executive Giuseppe Orsi hired U.S.-born Guido Ralph Haschke, who was then a consultant for the Finmeccanica group, to lead dealings in India to secure the contract.

Haschke and his partner Carlo Gerosa, prosecutors said, had close ties with the Tyagi brothers.


Action only after CBI probe: Antony
India will blacklist Finmeccanica SpA and cancel a deal to buy 12 helicopters from the Italian defence group if allegations of bribery are proven against the company, Defence Ministry A.K. Antony said on 13 February 2013.

Antony said the CBI had been ordered to investigate the purchase of the luxury choppers -- destined for use by India's political leadership. He said that if the allegations were proved true, those involved would be punished.

Antony said that so far internal enquiries by the defence ministry have found no evidence against Finmeccanica in the $754 million helicopter deal. He refused to answer specific questions about the Italian allegations and said the CBI investigation would find the truth.


Former IAF chief denies bribery allegations
SP Tyagi, who is facing charges of corruption over the 556-million-euro Chopper deal, has categorically denied any involvement in influencing the VVIP helicopters deal in favour of Italy's AgustaWestland.

Tyagi, the former Indian Air Force chief, who finds himself in the midst of the storm, added that the deal materialised three years after he retired. Tyagi, explained that the changes in specifications, as alleged by the prosecutors, to influence the deal were not made during his tenure.

Favouring a CBI probe, he said: "There should be an inquiry, only then can the facts be established."