(In a big diplomatic win for the Modi government ahead of the 2019 polls, Christian Michel, the alleged middleman in the AgustaWestland chopper deal, was extradited to India on Tuesday, 4 December. In that backdrop, this Explainer is being republished. It was first published on 12 January 2018.)
Since the scandal broke in 2012, the AgustaWestland chopper ‘scam’ has caught the imagination of the Indian public. The case became sensational due to the alleged involvement of the Manmohan Singh-led UPA government, which the BJP accused of corruption for facilitating the procurement of the choppers in 2010. The Indian government wanted to replace its Russian Mi-38 helicopters with modern choppers for VVIP conveyance (to transport the Prime Minister, President and other VVIPs) in 1999, soon after the Kargil War.
Over the next few years, they rejected some of the vendors who offered a cheaper deal, and went ahead with defence major Finmeccanica’s British subsidiary AgustaWestland, ordering 12 of its AWA101 choppers in 2010. It emerged in 2012, during investigations by Italian officials into alleged cases of fraud by Finmeccanica, that the deal with India, worth Rs 3,546-crore (556 million Euros), could possibly have been facilitated by middlemen who took kickbacks.
The alleged involvement of the then Air Chief Marshal SP Tyagi in this scandal also caused a stir, with him being arrested on 9 December 2016. Moreover, earlier in the same year, a letter produced before the Italian appeals court in the case allegedly mentioned the names of the then Congress President Sonia Gandhi and her close political associates including her political secretary Ahmed Patel. This caused an uproar in Parliament days after the revelation, with the BJP making allegations of corruption against the Congress. Why has this case now re-emerged in the public domain?
An Italian appeals court acquitted Giuseppe Orsi, the former president of defence and aerospace giant Finmeccanica, on Monday, 8 January, over charges of alleged bribes paid in exchange for a Rs 3,600 crore VVIP chopper deal to sell 12 AgustaWestland helicopters to the Indian government. Milan’s third court of appeal also acquitted Bruno Spagnolini, former CEO of the company’s helicopters subsidiary AgustaWestland, who had also been handed a four-year jail term on the same charges, Italian news agency ANSA reported.
Orsi was arrested in 2014 and resigned as chief executive of Finmeccanica, which was later renamed Leonardo. He was at the helm of AgustaWestland when the deal was struck and was suspected of involvement in the payment of bribes. While current CBI officials have claimed that this development will not have a bearing on the Indian probe in the case, former CBI Chief AP Singh has contradicted that claim. Here is how the AgustaWestland ‘scam’ unfolded:
Also Read: How Accurate Are Manohar Parrikar’s AgustaWestland Claims?
(This explainer was originally published on 12 January 2018 and has been republished from The Quint’s archives.)
What Was India's Requirement for VVIP Choppers?
In 1999, soon after the Kargil War ended, the Indian Air Force (IAF) realised it needed to replace its Russian Mi-8 helicopters, used as VVIP conveyance, which had proved to be unsafe. Thus, on Air Chief Marshal AY Tipnis’ watch in 2000, the IAF wrote to the Defence Ministry and proposed to the Prime Minister’s Office (PMO) that a new fleet of modern choppers be acquired.
To this effect, a Request for Proposal (RFP) was floated in March 2002 by the Defence Ministry, to which six suppliers responded, as per a report by The Indian Express. The IAF’s requirement that the chopper should be able to fly at a height of 6,000 metres was only met by the Eurocopter EC-225.
In 2003, the Special Protection Group (SPG), upon the request of the then National Security Adviser Brajesh Mishra, reported that the EC-225 was unfit for VVIP conveyance, due to its low cabin height of 1.39 metres. Upon the NSA and SPG’s observations, it was decided that, for the new choppers, the flying height requirement of 6,000 metres had to be altered as only one vendor could meet it, and the cabin height had to be increased.
The specifications had to be modified. Consequently, the IAF came up with the Air Staff Qualitative Requirement for VVIP helicopters in 2003, which lowered the flying ceiling to 4,500 metres and increased the cabin’s minimum height to 1.80 metres.
At the time of this recalibration, S Krishnaswamy was the IAF chief. In 2004, SP Tyagi took and authorised the new specifications for the choppers, as per a report by The Indian Express. In 2006, the Defence Ministry floated a new RFP with the 2003 specifications to six suppliers. Three companies responded, including defence major Finmeccanica’s British subsidiary AgustaWestland, with its AWA101 chopper.
By 2007, only two companies – Sikorsky (which made the S-92 helicopters) and AgustaWestland were left in the fray, this time under the tenure of new Air Chief Marshal Fali Homi Major.
Thus, the S-92 and AW101 choppers were tried and tested over the next two years. The latter emerged as the clear winner, with its advantage of two extra engines to fall back on in the event of one engine malfunction.
The AgustaWestland Deal
In February 2010, the Indian government signed a Rs 3,546-crore (556 million-Euro) contract with AgustaWestland. Finmeccanica beat S-92 Superhawk (US) to bag the deal. India was to receive 12 AW101 AgustaWestland choppers for the IAF. Eight of these were to transport the President, Prime Minister, Vice-President and other VVIPs, while four others would be used for other duties. In late 2012, the first fleet of AW101s reached India, with two more following soon after.
When and How Did the Alleged Scam Emerge?
In February 2012, the Italian attorney general’s office started an investigation into alleged fraudulent dealings by state-supported defence giant Finmeccanica, which led them to to include corruption charges in an over Rs 3,500-crore deal signed with India by the company’s helicopters subsidiary AugustaWestland for the supply of helicopters, as reported by The Indian Express.
The newspaper’s subsequent reports claimed that later that year, Guido Ralph Haschke – a middleman who allegedly got 51 million euros from AgustaWestland to influence the contract – was arrested in Switzerland. In February 2013, the Italian police arrested Giuseppe Orsi, the Chief Executive and Chairman of Finmeccanica, over charges of alleged bribes to the tune of Rs 360 crore to mediators to seal the deal during his tenure as AgustaWestland’s head.
The Alleged Scam’s India Connection
On 12 February 2013, the Italian police arrested Giuseppe Orsi on charges of allegedly paying bribes to Indian middlemen to bag the VVIP chopper deal with India. Consequently, the Indian Ministry of Defence (MoD) ordered a Central Bureau of Investigation (CBI) investigation into these allegations. In March that year, the CBI probe revealed that there was proof against the then IAF chief SP Tyagi that suggested he had extended favours to AgustaWestland by changing tech specs requirements for the VVIP choppers. Soon after, the CBI filed an FIR against Tyagi and 12 others.
Now, let us look at the Indian agency at the crux of the VVIP chopper scandal. IDS India, as per a report by TOI on 14 February, is the ‘ghost’ company which allegedly received bribes to the tune of Rs 140 crore over a period of five years through the tax haven of Tunisia.
But no official database seemed to feature IDS India. Not even extensive probing into the Ministry of Corporate Affairs database showed proof of a company named IDS India. In the course of the investigation in India, links were drawn between IDS Mauritius and two Chandigarh-based companies, IDS Infotech and Aeromatrix, whose holding company is IDS Mauritius.
Notably, three of Aeromatrix’s directors were key suspects in the AgustaWestland scandal – business partners Guido Haschke and Carlo Gerosa, and New Delhi-based lawyer Gautam Khaitan. Khaitan was arrested on 3 September 2014 for allegedly facilitating the transfer of bribe money in the deal via shell companies in foreign tax havens.
He was released on bail on 9 January 2015. The Chandigarh-based Aeromatrix (registered in Delhi) also featured in the recorded conversations of the suspects in the course of the probe by Italian officials.
Key Players & Charges Against Them
Guido Haschke and Carlo Gerosa
In April 2012, the Italian police raided the Switzerland-based offices of Haschke before arresting him on several charges, including that of money laundering. Call records of Guido Haschke, who emerged as one of the middlemen in the deal, suggest that he received kickbacks from AgustaWestland through firms run by him and his business partner Gerosa in Tunisia and Mauritius.
However, on 7 January 2017, in his first ever telephonic interview to any media organisation, Haschke told The Quint:
No bribe was paid by me or my partner Carlo Gerosa to Air Chief Marshal Tyagi. He has never been paid a single penny, nor did he ever ask for money directly or indirectly.Haschke to The Quint
This runs counter to the CBI’s reported claim that Haschke, in his testimonies to an Italian court, had given details about the proportion of bribes paid to the former Air Force Chief and his cousins. While speaking to The Quint, Haschke and his counsel, however, did admit to meeting SP Tyagi three times. Out of these, two were "official" meetings and the other was a "private" one.
The first "official" meeting between Haschke and Tyagi happened in February 2005 at the Air Force HQ in Delhi. Many others were at the meeting, including the head of Finmeccanica, G Zappa, and a team of Air Force officials.
The purpose of the meeting was to clarify the operational requirement of a VVIP chopper. It was an official meeting and had nothing to do with the AgustaWestland chopper deal. There were other Air Force officers in the meeting.Prashant Kumar, Haschke’s Lawyer to The Quint
According to his lawyer, Haschke’s second meeting with SP Tyagi happened in Bangalore during an Air Show. But there wasn’t any discussion related to the chopper deal at this meeting.
Haschke says a third private meeting with ACM SP Tyagi took place at Julie Tyagi’s residence in January 2006. One of AgustaWestland’s top executives, Lunardi, was in India at the time. Procedures for a meeting with the IAF Chief are lengthy and since Lunardi was in India only for a couple of days, Haschke told The Quint that a short private meeting was arranged during which SP Tyagi requested that all documentation pertaining to the discussion be sent officially to his staff.
It was done purely for the sake of expediency and none of us had anything wrong in mind! This is proven by the request by ACM Tyagi that documents be sent officially to his staff subsequent to this meeting.Haschke to The Quint
Christian Michel
At the time of the scandal, Christian Michel was a well-known British consultant who was very active in the Indian defence sector. It was alleged that he had been hired by AgustaWestland to swing the contract and had in fact walked away with the bulk of the 51 million euro commission.
The Enforcement Directorate (ED), in its second chargesheet in the AgustaWestland case on 15 June 2016, named alleged middleman Christian Michel James and his Indian associates in connection with the ‘scam’. The agency found that Michel received around Rs 225 crore from Messrs AgustaWestland as “kickbacks” to execute the 12-helicopter deal and to make it look like a genuine transaction.
A Red Corner Notice had been issued against him by Interpol on the request of both the ED and CBI. Though Haschke had given a clean chit to himself and the Tyagis, he had not vouched for Michel’s integrity in his interview to The Quint on 7 January 2017.
“There had not been any corruption as far as we are concerned. I cannot vouch for the British guy (Michel). He was not my partner so I have no idea what he did…”
The Tyagi Brothers
Sources from within investigating agencies claimed to have ‘established’ the money trail to the Tyagi brothers; Julie aka Sanjeev Tyagi, Docsa aka Rajiv Tyagi, and Sandeep Tyagi. But Haschke told The Quint in an interview on 7 January 2017 that the Tyagi brothers were his business associates long before the VVIP chopper deal, and were paid for services in a separate arbitration matter.
The Tyagi brothers were our business partners way before the deal happened. They were compensated for services in connection to an arbitration matter. Do you think anyone in his right mind who wanted to pay a bribe, would do so through an officially recorded invoice?Haschke to The Quint
When asked about the kind of services rendered by the Tyagi brothers, Haschke told The Quint:
There was a complex arbitration for a power plant built in Tamil Nadu by an Italian company. It was part of the Finmeccanica group. That company was stuck in this arbitration matter for years. The Tyagi brothers helped us get out of this mess. They helped us in understanding how to help this company deal with this arbitration. It had nothing to do with AgustaWestland.Haschke to The Quint
Former Air Chief Marshal SP Tyagi
Former Air Chief Marshal SP Tyagi, arrested on 9 December 2016 on charges of allegedly receiving kickbacks in the multi-million-dollar AgustaWestland VVIP chopper deal, was given bail by a special court in New Delhi on 26 December the same year, as per a report by The Quint. Central Bureau of Investigation (CBI) Special Judge Arvind Kumar allowed Tyagi's bail application and asked him to furnish a personal bond of Rs 2 lakh, and a surety of a like amount.
The judge had granted bail to Tyagi, who was 72 years old at the time, after considering his age and medical condition. It had been alleged that the former Air Force Chief reduced the altitude ceiling of the helicopter from 6,000 m to 4,500 m, which helped AgustaWestland bag the tender for the VVIP choppers.
But the Italian court observed that neither Haschke nor Tyagi alone could have influenced the decision to lower the operating altitude since this decision was taken into consideration and evaluated by authorities before Tyagi assumed public duty.
Giuseppe Orsi
On 12 February 2013, the Italian police arrested the former CEO and chairman of Finmeccanica on charges of paying bribes to middlemen to secure the sale of the AgustaWestland helicopters.
However, on 9 October 2014, a lower court, while acquitting Orsi (and former AgustaWestland CEO Bruno Spagnolini) of corruption charges, convicted them of the lesser charge of “falsifying invoices” and sentenced them to two years in jail. On 7 April 2016, an Italian court of appeals negated the earlier ruling, and sentenced Orsi to four-and-a-half years in prison for both corruption and falsifying invoices.
The Politics of the Case
When the AgustaWestland scandal emerged, fingers were also pointed at the UPA government on whose watch the alleged scam had taken place.
In April 2016, the Milan Court of Appeals reversed a lower court’s ruling and accused SP Tyagi of receiving kickbacks in the AgustaWestland deal via wire transfer. This verdict caused a political uproar, with the BJP pointing fingers at the Congress and accusing its leadership of corruption.
In particular, a note submitted to the Italian appeals court – which allegedly mentioned the names of the then Congress President Sonia Gandhi, her political secretary Ahmed Patel and party leader Oscar Fernandes – triggered a storm. However, it was alleged, as per a News-18 report, that middleman Christen Michel had given a list of potential targets to Peter Hulett, an AgustaWestland employee, to clinch the AgustaWestland deal.
Surya Gangadharan, former international affairs editor, CNN-IBN and NDTV, shed light on the politics of the case in an article for The Quint on 28 April 2016:
The Quint: Does the Milan Court judgment merely ‘embarrass’ or does it actually ‘incriminate’ Sonia Gandhi? What about her name being mentioned in a letter from middleman Christian Michel to Peter Hulet, head of sales at AW India, as the ‘main driving force’ behind the deal?
Surya Gangadharan: The Milan Court of Appeals is like an Indian high court. What is embarrassing here for Sonia Gandhi is the observations made in the judgment. One, that the UPA government (of which she was the power behind the throne) showed “substantial disregard to arrive at a full explanation of facts (was) effectively demonstrated by the procedural behaviour of the Indian Ministry of Defence.” In other words, the MoD was less than cooperative in investigating the scandal. It took one full year for the MoD to send three documents to the Italian court.
Second, the judgment notes the letter written by one of the middlemen Christian Michel to the India head of AgustaWestland, Peter Hulett, which says, “Since Mrs Gandhi is the driving force behind the VIP, she will no longer fly with Mi8…” This is deeply embarrassing but cannot be cited as explicit proof of her involvement. Since she held no government position, she was anyway not entitled to fly by VIP aircraft. But the revelations undermine her politically and could leave her vulnerable to legal action.
The Quint: What about the involvement of Manmohan Singh and Ahmed Patel?
Surya Gangadharan: As regards Manmohan Singh, there is a March 2013 handwritten note by Orsi (then in prison) which says, “Call Monti or Ambassador Teracciano in my name to ask him to call the PM Singh.” The court suspects this note determined the outcome of the request to India for judicial assistance. All they got were three documents a year later. As for Ahmed Patel, there is speculation the reference to “AP” in a so called “budget sheet”of bribes to be paid to politicians was Ahmed Patel with three million euros mentioned against his name.
Pranab Mukherjee, who was defence minister in 2005 when the AgustaWestland deal was cleared, is mentioned as a close adviser. Are the references to Manmohan Singh and Ahmed Patel sufficient to begin legal proceedings against them, to send them to jail? The judgment notes the handwritten references to “Pol” (politicians?), “Bur”(bureaucracy?) and “Fam” (family?) and the supposed quantum of payments to be made. But that is too vague for going ahead with prosecuting them. There needs to be a credible investigation in India to identify who any of these people could be. There is plenty of suspicion and out there in the street people have formed their own opinions. But opinion is not proof.
Recent Developments in the VVIP Chopper 'Scam'
In a big diplomatic win for the Modi government ahead of the 2019 polls, Christian Michel, the alleged middleman in the AgustaWestland chopper deal, was extradited to India on Tuesday, 4 December.
Former IAF Chief SP Tyagi was given a clean chit by an Italian court on Tuesday, 9 January 2018, citing a lack of evidence.
Moreover, an Italian appeals court acquitted Giuseppe Orsi on 8 January. On 9 January, Milan’s third court of appeal also acquitted Bruno Spagnolini, former CEO of AgustaWestland, who had also been handed a four-year jail term on the same charges, Italian news agency ANSA reported.
Orsi had been arrested in February 2013 by the Italian police on charges of alleged kickbacks to seal the VVIP chopper deal.
Both Orsi and Spagnolini had been cleared on charges of committing international corruption at the first-instance trial in 2014, but convicted of false invoicing and sentenced to two years in prison. Both men had appealed against the conviction, while the prosecution had appealed against the acquittal on the corruption charges. In December 2016, the Supreme Court of Cassation (Italy) had ordered a repeat of the appeals trial, resulting in their acquittals on the corruption charge.
India had scrapped the contract with AgustaWestland in January 2014 for supplying 12 AW101 VVIP choppers to the Indian Air Force over alleged breach of contractual obligations and charges of kickbacks paid by the firm for securing the deal.
In light of the corruption charges, India also barred Finmeccanica and its group companies from participating in any new programme of the Defence Ministry. The CBI in September last year had charge-sheeted former IAF Chief SP Tyagi in a Delhi court along with nine others for bribery in the case.
They were charge-sheeted for offences under the Prevention of Corruption Act and the IPC in the case relating to alleged bribery of Rs 450 crore. The CBI alleged there was an estimated loss of 398.21 million euros (approximately Rs 2,666 crore) to the Exchequer in the deal.
Senior CBI officials told PTI that the acquittal of Giuseppe Orsi and Bruno Spagnolini would not affect their case as it was based on an independent investigation with ‘strong evidence’.
Sources told PTI that there is the option of appeal with Italian authorities even after the order of the Milan court of appeals.
We have had a completely different probe. We have very strong case.Abhishek Dayal, CBI Spokesperson to PTI
However, contradicting these claims by serving CBI officials, former CBI Chief AP Singh on Wednesday, 10 January, told ANI that the Italian court’s order would affect investigations in India.
I am not aware of the details of the case because I was not there when the case was registered... The information also first came from Italy that some bribe has been paid in this deal. Then they were later acquitted and they were being convicted and now they are acquitted again. So, finally the highest court has acquitted them. So, definitely it would have an impact on the Indian investigations because the major part of the investigation was based on the Italian investigation.AP Singh, Ex-CBI Chief to ANI
The former CBI chief, however said that in the two-part investigation that the Indian part is still relevant.
"But there are two parts of this investigation. One the Italian authorities have investigated... But there is an Indian part of the investigation, which is relevant and it will still remain relevant that the allegation was that the QRs of the helicopters were changed to favour AgustaWestland. Now, it is up to the investigating authority to prove that this happened," AP Singh added.
An Italian court also acquitted two former Leonardo (earlier Finmeccanica) executives in the AgustaWestland case, wherein bribes were paid to secure the contract of supplying 12 VVIP choppers to India. The case has been listed for further hearing on 30 May 2018.
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