Home Corruption From Raj to Rafale11:Bofors and After

From Raj to Rafale11:Bofors and After

In this part of the series on corruption in modern India, we look at bribes in defence deals. We look at the secretive mechanisms used by the giant global military-industrial complexes to win lucrative deals. We look at how they use middlemen, senior government officials, and politicians, even prime ministers, to achieve their objectives. In the case of Bofors, the needle of suspicion pointed at Prime Minister Rajiv Gandhi. It exposed the importance of tax havens, how bribes are routed through foreign bank accounts, and how deals are struck in private conversations among the politicians

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THE investigations into the Bofors’ bribes were unique for several reasons. It was the first time in independent India that a huge defence deal was explored by several agencies, including a Joint Parliamentary Committee (JPC) and Central Bureau of Investigation (CBI). It exposed how tax havens such as Switzerland, Panama, and others, are used to make illegal payments. It unmasked the corporate and banking veils of the mysterious, shadowy, and dangerous worlds of agents, global manufacturers, and middlemen. Most importantly, it unveiled the powerful nexus between the global military-industrial complexes, politics, and diplomacy.

For the first time, the “smoking gun” evidence pointed at the highest levels in India and Sweden, the buyer and seller of the Howitzer guns. Indian Prime Minister Rajiv Gandhi and his Swedish counterpart, Olof Palme—both died in tragic manner—negotiated directly on the purchases, and allegedly discussed the payments. They were huge political ramifications in both countries—Rajiv Gandhi lost the 1989 general elections, and was assassinated in May 1991; Palme was killed before the deal was signed, and his murder remains “unsolved” and is shrouded in mystery.

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Rajiv Gandhi and his wife Sonia Gandhi

‘Q’, who was the representative of an Italian conglomerate, Snamprogetti, pushed through several of its technology sales in India. He was close to the Gandhi family, especially Rajiv Gandhi’s wife, Sonia. By the time, the CBI named him in 1999, he had left the country

However, over the past three decades, despite the money links with prominent Indians, non-resident Indians, and foreigners with strong Indian links, there were no major indictments. A number of people, apart from Gandhi and Palme, connected with the scandal are dead, including SK Bhatnagar, defence secretary, Bofors’ Indian agent, Win Chadha, Defence Minister VP Singh, the “mysterious Italian”, OttavioQuattrocchi, and several others. The “deep throat” in the case, Sten Lindstrom, the former head of Swedish Police, who headed the investigations, stated that there was “no evidence Rajiv Gandhi received a bribe”.

In March 1986, a few weeks after Palme’s assassination, India agreed to buy the mobile guns from a Swedish company, AB Bofors. In April 1987, the Swedish public radio revealed that bribes were paid to several individuals, including Indian politicians, in the $1.4 billion deal. Later, the Swedish National Audit Bureau found that money was paid into the bank accounts of Svenska Inc (Panama; 188.4 million kroners), AE Services (UK; 50 million kroners), and PITCO/MORESCO (Switzerland; 81 million kroners). The Swedish arms maker agreed to pay 100,000 kroners a month to its Indian agent, Chadha.

Two things are important to note at this stage. The first is that bulk of the alleged bribes was paid in bank accounts in tax havens (Panama and Switzerland). This led to a huge debate on the role of such nations to hide tainted money across the globe, their staunch secrecy laws to hide the identities of the account holders at any cost, and the illegal amounts that Indians held in such foreign accounts. What was significant was that people at the highest level were involved in large defence deals. These became the buzzwords, and were discussed at every street corner.

Obviously, for the first time in India, tax havens emerged as the villains in popular discourse. They were painted as the “bad boys”, which helped the global criminals to hide and, subsequently, wash (launder) their ill-gotten wealth to make it clean and legit. Although such nations, and their banking systems, were used for legal purposes, even by the Fortune 500 companies, the image stuck, and continued for the next three decades. This is evident from the later scandals like the Panama Papers and Paradise Papers. People believed that anyone who has a bank account there was guilty.


Indian Prime Minister Rajiv Gandhi and his Swedish counterpart, Olof Palme—both died in tragic manner—negotiated directly on the purchases, and allegedly discussed the payments. They were huge political ramifications in both countries

INVESTIGATORS exposed ways in which money was kept in tax havens. These included under-invoicing of exports—a product that cost RS. 100 was billed at RS. 50, and the difference was paid by the foreign buyer into an account in Switzerland, Panama, or Mauritius. The other way was over-invoicing imports – what cost RS. 50 was invoiced at RS. 100, and the difference was deposited by the foreign seller into a Swiss account. Finally, there was the mechanism of direct bribes and commissions in large government and private deals. In the 1980s, Switzerland was the most popular destination because of its credibility, and ease of hiding identities of the account holders.

As the JPC report highlighted, the Swiss Authorities were reluctant to share relevant information about the account holders. The then Finance Minister, Narayan Dutt Tiwari, told Parliament that they imposed several restrictions. One, they maintained that they “would not permit generalised inquiry or furnish ordinary information about the (banking) customers’ accounts unless specific and appropriate court orders are obtained in Switzerland”. Two, they said that they “would entertain request for assistance in criminal matters”, as per the Swiss laws. Three, they said that “tax evasion or violation of foreign exchange regulations would not be regarded as criminal offences”.

To expedite the exchange of information, India decided to enter into a treaty for mutual assistance in criminal matters with Switzerland, and assured the Parliament that “further action within the framework of Indian and Swiss laws will be taken” to get the banking details. As was expected, nothing came from these steps. In the 2014 national election campaign, the BJP too claimed that it would get details from Swiss banks to expose Indians who have hidden their money there. In the past five years, as was the case in the 1980s and 1990s, the information exchange was slow and inadequate.

In the 1990s, there were shocking estimates that Indians had stashed away between $500 billion and $1 trillion in Swiss bank accounts. In recent times, when the Swiss authorities disclosed the figures, the amount was much smaller. The reason was that since India moved towards a market economy, Indian entrepreneurs used legitimate routes to channel their foreign wealth back into the country, either as direct investments, or through purchase of shares of Indian companies sold in the European and American markets.

The second major disclosure in the Bofors case was the manner in which money was deposited, and then routed to reach the real recipients. For example, the directors of Svenska (Panama) were locals. However, the JPC noted that the company’s “President, Vice-President-cum-Treasurer and Secretary… were all ladies and were not persons of any means.” In addition, there was little transaction in the “Post Box” hired to receive mails. The address was not of the company, but that of its bankers. It was a “shell” or “shelf” company, which can be bought off-the-shelf, so to say, and used without revealing the identities of the real owners.

However, N Ram who, along with Chitra Subramaniam, launched the early media investigations into Bofors, revealed that Win Chadha, the weapon maker’s agent in India, had the complete power of attorney to handle the bank accounts of Svenska. He could individually decide if the money was to be transferred to other individuals or entities. Since Svenska was paid the highest amount, 188.4 million kroners, it was alleged that a substantial part of this sum was meant for Indian politicians and bureaucrats. Until his death, Win Chadha, and later his family, denied the charges.

In his personal diary, Martin Ardbo, the head of Bofors, mentioned a person named ‘Q’. The mystery of ‘Q’ was solved when it was found that OttavioQuattrocchi, an Italian who lived in India for years, allegedly operated the Swiss bank account of AE Services, which received 50 million kroners from Bofors. He and his wife, Maria, owned two accounts in the UK, which were allegedly linked to A.E. Services. In 2005, the CBI told the UK’s Crown Prosecution Service that it couldn’t connect the UK accounts with Bofors payments.

Win Chadha

‘Q’, who was the representative of an Italian conglomerate, Snamprogetti, pushed through several of its technology sales in India. He was close to the Gandhi family, especially Rajiv Gandhi’s wife, Sonia. By the time, the CBI named him in 1999, he had left the country. India’s efforts to extradite him initially from Malaysia faltered, when a Malaysian court denied the request. In 2007, he was detained in Argentina on the basis of an Interpol lookout notice. India failed to get him back this time too and, in 2008, the Interpol withdrew its red corner notice, thanks to a request by the CBI.

PITCO/MORESCO, the third account that received 81 million kroners from Bofors, was allegedly linked to the Hinduja Brothers, who are worth $17.6 billion today as per the Forbes List, and are based in London, Geneva, and India. They are known for their political connections across the globe, including in India, and were allegedly involved in several global arms deals. They denied any involvement in Bofors. In 2004, the Delhi High Court “quashed the charges under the Prevention of Corruption Act” against the brothers.

Although the money was not linked to Rajiv Gandhi, and Lind storm, the Swedish Police head, confirmed it, there was circumstantial evidence to raise a finger of suspicion against the former prime minister. The first was that the defence ministry initially favoured the Austrian gun. Later, it shortlisted France’s Sofma as the first supplier, followed by Sweden’s Bofors. This was done when Indira Gandhi, Rajiv’s mother, was in power. Suddenly, during Rajiv’s tenure, the ranks were reversed—Bofors emerged as the lead supplier.

The allegations were that this was because of the close proximity between Rajiv and Palme. In fact, India’s was the largest deal bagged by Bofors, which was later implicated by de-classified CIA papers to be involved in bribes across the globe to grab deals. There is evidence that the two prime ministers met a few times to discuss the deal. In Parliament, Rajiv Gandhi confirmed that he spoke privately to Palme at least twice, once in autumn 1985 and then in January 1986 (a few weeks before Palme was shot dead).

(Left to Right) Quattrocchi, Martin Ardbo, Sten Lindstorm

For the first time in India, tax havens emerged as the villains in popular discourse. They were painted as the “bad boys”, which helped the global criminals to hide and, subsequently, wash (launder) their illgotten wealth to make it clean and legit

HOWEVER, the reason why Rajiv Gandhi, and his loyalists and friends, sunk deeper into the Bofors quicksand was because of the initial claim that no middlemen were involved in the deal. KC Pant, the Defence Minister, told Parliament, “Indian Prime Minister Rajiv Gandhi during his talks in 1985 with Olof Palme said… that the company should have no middlemen. The deal should be drawn directly between Bofors and the Indian Defence Ministry.” Both the company and Palme (in personal conversation with Rajiv Gandhi in January 1986) gave these assurances.

Rajiv Gandhi told Parliament that the “issue (of purchase) was raised by the Swedish Prime Minister, who said that they were interested that India buy their guns. I said that 1) the guns must be technically acceptable and superior to all the other weapons; 2) the cost must be less than the competitors, and; 3) if you want any involvement at my level, you must guarantee me. That means I must get a firm answer from the Prime Minister of Sweden that no middlemen are involved.” Hence, he claimed that this was indeed the case.

Unfortunately, the mounting evidence that money was indeed paid, and in hundreds of millions of kroners, implicated the Indian Prime Minister. According towww.telegraphindia.com, “Galigali me shorhai, Rajiv Gandhi chorhai (There were shouts in the streets that Rajiv Gandhi was a thief), was the favourite election slogan of the Opposition, of which BJP was very much a part, during the 1989 parliamentary elections.” In fact, during the campaign, VP Singh, who became the next prime minister, would show a sheet of paper at rallies, and claim that it had the names of bank accounts of Rajiv Gandhi and his family, which received the bribes from Bofors.

Since 1987, when the Bofors allegations first surfaced, several defence deals were questioned for the same reasons—favouritism towards a specific supplier, and payment of bribes. This was true of the Scorpene submarine and Augusta helicopters deals. And then came Rafale, which was described by a Congress-owned newspaper,National Herald, as the new Bofors. As one astute observer said, “If the line is true, then favouritism was involved in both.”

Like Bofors, Rafale died a natural death. Unlike Rafale, which lost its sting within a year or so, it took almost three decades for the Bofors obit. But even now, it isn’t completely dead, as was witnessed in the 2019 election campaign. Bofors is dead, long live Bofors.

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