Cover Story: Quattrocchi; Bofors Italian Trial

If the CBI proves Quattrocchi used his proximity to the Gandhi family to swing the Bofors deal, it could spell more than just trouble for Sonia--and the Congress.

In the age of television and instant flashbacks, there are some statements that end up haunting politicians. As she comes to terms with a humiliating electoral defeat, Congress President Sonia Gandhi must be hoping that inefficient archivists have misplaced the footage of her maiden press conference on August 13. Answering questions after the release of her party manifesto, Sonia was at her combative best. Thumping the rostrum, she challenged the government on the Bofors controversy that has dogged her family since 1986. "We have been asking the government to bring forward the papers. But where are those papers? It suits them to keep the matter hanging."

Ten weeks ago Sonia's outburst was greeted with nods of approval. Some 12 years after it burst on the political scene, the Bofors issue appeared to have run out of steam. After the initial excitement over the sensational disclosures gave way to protracted and complicated litigation in faraway courts, the conventional wisdom was that Bofors was a dead issue. Indeed, after the 155 mm guns performed with devastating effect in Kargil, Congressmen entertained notions of turning Bofors into a symbol of Rajiv Gandhi's farsightedness.

Can Rajiv's Name Be Dropped?

Once a name is in the chargesheet, the Government is powerless. The Supreme Court says the decision to put someone up for trial rests with the investigating officer. That Rajiv is dead isn't ground for exclusion. Weren't Indira's killer Beant Singh and Rajiv's killers Dhanu and Haribabu named as co-accused? The Indian Evidence Act says if a deceased co-conspirator is excluded, his conduct can't be used in evidence against the others. That makes a case under Prevention of Corruption Act meaningless.

That was when the CBI struck. Having patiently ploughed through the mountain of papers that its former chief Joginder Singh brought home ceremoniously from Berne in January 1997 and doggedly pursued the trail through the Swiss legal maze, the much-maligned investigating agency decided it was dividend time. Elections over and a new government in place, the CBI chose the first week of the new Parliament to press its chargesheet of a "criminal conspiracy" to short-change the country.

To those Bofors buffs who have diligently followed the twists and turns of every Letters Rogatory (LR) and Swiss Cantonal Court judgement, the chargesheet was predictable. For others, however, there seemed to be an emerging answer to the one question behind the controversy: who got the money?

Can Q be extradited?

The Interpol red alert ensures Quattrocchi is stuck in Kuala Lumpur. Getting him back to India isn't going to be easy. In 1997, Malaysia rebuffed a CBI team armed with a mere arrest warrant. This time CBI has better documentation. A criminal case involving bribery, corruption and cheating has been filed , the evidence based on unimpeachable Swiss bank records. There is no extradition treaty, so Malaysia has to be convinced the crime is a serious offence there as well.

There were many answers but the one that tickled the political imagination most was the presence of Italian passport-holder Ottavio Quattrocchi in the chargesheet. The mysterious Q who first featured in Bofors chief executive Martin Ardbo's personal diary has now conclusively been identified as the former Indian representative of the Italian public-sector giant Snam Progetti. Quattrocchi, who came to India in 1968 and stayed on till 1993, had, by his own admission developed "a good friendship" with Rajiv and Sonia. "As it happened, two of my four children are more or less the same age as Rahul and Priyanka ... They were very close friends," Quattrocchi admitted in an interview in March this year. But party spokesman Kapil Sibal incredulously denied "any close relationship or great friendship" between the families.

Can the case stick?

This is a natural question given the CBI's poor track record of convictions. This time, however, much of the evidence has been provided by Swiss banking records that clearly show payments by Bofors in violation of all agreements. Plus, beneficiaries of the accounts have been conclusively identified. Going by available evidence, Bofors could be a CBI success story if some additional evidence is secured of public servants being compromised. That could be an uphill task.

According to the CBI affidavit to the Delhi High Court in 1998, "Investigation has shown that the families of the then prime minister of India and Quattrocchi were on very intimate terms ... Quattrocchi and family had free access to the prime minister's house. The closeness of the two families is also proved by some of the family photographs collected during the investigation. As a result, Quattrocchi was able to project himself as a person of great influence."

The friendship must have been strong enough for Sonia to not immediately believe all the tales of Quattrocchi's involvement in the Bofors deal, even after the Italian and his wife vanished overnight from India on July 29-30, 1993. That happened a mere six days after Interpol alerted the authorities in India of a startling discovery -- that among those appealing against the transfer of incriminating Swiss bank documents was one Ottavio Quattrocchi. "The CBI has found him suspect. But we have not seen till today the papers that he has done something," Sonia told the press on August 13 this year.

What about the Hindujas?

The chargesheet identifies the Hinduja brothers as players in the Bofors saga but hasn't listed them among the accused. The reason: the papers pertaining to their banking transactions are still stuck in Switzerland. The Federal Court in Geneva has given the go-ahead but the Hindujas have gone in final appeal to the Swiss President. If they succeed, the Government could still prosecute but the case may collapse for want of hard evidence.

The presumption of innocence was touching. Unfortunately, it is not borne out by other evidence. As early as 1988, The Hindu, drawing extensively from Swedish sources, had revealed that the Bofors payoffs followed three streams.

Payments amounting to SEK 188.4 million (Rs 38 crore at the rates then) to the Svenska account managed by former Bofors agent Win Chadha.

Sum of SEK 81 million (Rs 16 crore) payed into the Pitco-Moresco-Moineao accounts said to be controlled by the London-based Hindujas.

SEK 50.46 million (Rs 10 crore) paid to UK-based AE Services for ensuring that Bofors secured the contract by March 31, 1986.

The AE Services dimension was the most intriguing. The company, whose principal, curiously, had a relationship with Bofors' main competitor Sofma, entered the picture as late as November 15, 1985, when negotiations were at an advanced stage and seems to have been crucial in clinching the deal. It was brazen enough to commit itself to securing the contract by March 31, 1986.

In the Ardbo diaries of 1987, there is a reference to Major R.A. Wilson of AE Services having talked to the "Gandhi Trustee lawyer". In addition, Wilson is said to have told Ardbo on September 2, 1987, when Bofors was engaged in a cover-up operation, that "Q involvement was a problem because of his close connection to R". In February 1992, Swedish daily Dagens Nyheter quoted a top Bofors official as indicating that "the money went to Rajiv through ... AE Services. Without them Bofors couldn't have got the order".

Despite these tell-tale clues there was little else to connect Q to AE Services. Now the mist seems to have lifted. In an affidavit sworn at Geneva on December 10, 1993, Myles Tweedale Stott of AE Services -- whose guiding force seems to have been one S.I. Mubarak (SIM) -- has confirmed that "the initial approach to me came from Ottavio Quattrocchi ... As a result of this approach, I requested R.A. W(ilson) to contact Ardbo. Consequently a contract was drawn up between AE Services and Bofors dated November 15, 1985." Stott goes on to say, "In August 1986 I was requested to open an account with Nordfinanz (NFZ) Bank in Zurich in the name of AE Services Ltd. On September 8, 1986, NFZ account was credited with a transfer made by Bofors of $7.3 million (Rs 9.5 crore at then rates) ... SIM was informed of this receipt and instructed me to make various disbursements of which the largest sum (US $7 million or Rs 9 crore) was to be made to Colbar Investments, a Panamanian company."

The subsequent story is documented in the Geneva Cantonal Court order of September 6, 1996. According to the court's findings, AE Services credited a total of $7.12 million (Rs 9.3 crore) on September 16 and 29, 1986, to Colbar Investments Ltd, "the economical owner of the said company being Ottavio Quattrocchi". The Colbar account in turn paid $7.94 million (Rs 10.2 crore) to Wetelsen Overseas SA "of which Ottavio Quattrocchi also was the economical owner". On May 21, 1990, $9.2 million (Rs 11.9 crore) was transferred to an account of Inter Investment Development Co in Guernsey (Channel Islands). According to the CBI chargesheet, "the entire money ... was further channelled to various accounts in Switzerland and Austria within a period of 10 days of its receipt in Guernsey."

The Swiss court categorically turned down Colbar's plea for secrecy. "Colbar Investments and Quattrocchi seem to have received an amount issuing from commissions paid by Bofors and one cannot therefore say that their appearance in the case was the proceed of pure chance, especially that according to the overt confession of the appellants it appears that Quattrocchi had relationships in India at the highest level ..."

Following the Swiss court order, the special court of judge Ajit Bharihoke issued a warrant of arrest against Quattrocchi on February 6, 1997. An international red-corner alert was also issued against him. Yet, Quattrocchi maintained his plea of innocence. He filed a suit in the Delhi High Court on March 24, 1998, against the arrest warrant and red alert where he claimed that "the movement of money, if any, has been outside the Indian territory and the matter concerned payments of some contractual obligations between a company in Sweden for its business/commercial transaction with the government of India". The petition also claimed "payment of any commission by Bofors to anyone would only be a violation of a condition of contract, breach of which would not entail criminal action ..." In any case, Quattrocchi claimed that Bofors paid AE Services, not him.

Though Quattrocchi's petition was rejected in the high court and Supreme Court -- where it was accompanied by the drama of an offer to come to India to be questioned -- there is one facet of his defence that should worry the CBI. Quattrocchi has claimed he is not covered by the Prevention of Corruption Act as he didn't corrupt a public servant. To prove its case, the CBI must demonstrate that he either corrupted a public servant or was acting as the agent of one.

The chargesheet proceeds on the assumption that the negotiations leading up to the selection of the Bofors gun wasn't entirely above board. There is also a gamut of circumstantial evidence to show Rajiv was tardy in pursuing the case and often conveyed the impression of being a player in the cover-up. For example, when the Bofors team visited India during the Joint Parliamentary Committee inquiry, officials asked them about every conceivable suspect but kept Quattrocchi's name out of the interrogation. But is the doctrine of proximity adequate to make the charge of criminal conspiracy stick? Quattrocchi did receive payment from AE Services for what can be presumed to be services to Bofors. But did he corrupt a public servant or aid in his corruption? Or was it a case of Bofors reneging on its assurances to the government to not have commission agents?

Much of the answer lies in locating the end use of the money paid by Bofors. It is ironic that even after a decade of investigations, the CBI has only been able to locate the tip of the iceberg. The questions that remain unanswered are: Who was the "economical owner" of the International Investments Development Co in Guernsey? Who did that company pay in Switzerland and Austria?

Over the past year there has been a spate of LR to various countries for unearthing additional information. The authorities in Liechtenstein, where banking secrecy is an article of faith, have supplied a few documents and more are awaited after the completion of scrutiny by the head of legal services. In Bahamas, where the first request was rejected, there is an appeal pending in the Supreme Court. Luxembourg has suggested an additional LR and this is under preparation in Delhi. With Austria, Jordan and Panama, the matter is being pursued through diplomatic channels.

One crucial link is, of course, Sweden, a country that has most reason to be embarrassed by the conduct of Bofors. An LR was issued on March 29, 1990, and led to Swedish authorities executing the order partially the next year. But there is a huge gap between demand and availability. Apart from the Ardbo diaries, the agreements between Bofors and its agents and details of payments, there is the correspondence between Quattrocchi, Ardbo and AE Services. A fresh LR was sent on April 7, 1998. This was accompanied by clarifications made on July 1 this year. But even if Sweden cooperates with papers, there seems little chance of it agreeing to Ardbo's extradition to stand trial. A foreign ministry spokesman in Stockholm ruled it out and Ardbo's own attitude is hostile.

It's all an excruciatingly slow process, one reason why there has been no charges against the Hindujas. The CBI chargesheet is economical in its details of the involvement of this NRI family that wields tremendous clout in political and business circles in India. It notes that "the investigations concerning the role of ... G.P. Hinduja, Prakash Hinduja and Srichand Hinduja and other persons including companies are continuing". Home Minister L.K. Advani has also said that a chargesheet against them is due. Perhaps it's a question of patience. The documents pertaining to the Hinduja transactions have been cleared for release to India by the highest Federal Court. However, there is an appeal pending before the Federal Councillor to stop the release of the documents on the ground that it is politically motivated. To counter it, the Government is also in touch with the Swiss authorities using different channels. On November 24 last year, Prime Minister Atal Bihari Vajpayee told the visiting Swiss President that bilateral friendship would be strengthened through cooperation in getting to the bottom of the Bofors tangle.

That there is a subtle political dimension is inescapable. In the five years of P.V. Narasimha Rao's administration, the government dragged its feet over the investigations and there were attempts to even derail it altogether. Former external affairs minister Madhavsinh Solanki ruined his political career by trying to gently tell the Swiss authorities that Delhi wasn't really interested. He was not the only one who went beyond the call of duty.

Quattrocchi's known friendship with the Gandhi family was a factor behind his easy escape from India. When the news of his involvement trickled into India, the CBI chose to play safe. Lengthy notes were exchanged among the top brass to avoid having to take any decision. The CBI director sent the file to minister of state Margaret Alva on July 24, 1993, with the noting that legal advice indicates that "in the absence of documents or any other incriminating evidence, it is premature to search or arrest as the status of the appellant is yet to be determined as an accused ..." Alva retained the file till August 16. Quattrocchi, however, took the hint and left India in a hurry on July 29-30.

For Quattrocchi, the decision to get out was probably prudent. As the Bofors controversy hots up yet again, the question in the minds of both the ruling bjp and the opposition Congress is: How will Sonia be affected by the conclusive proof of a close family friend's involvement?

That she will be affected is certain. On the surface, the Congress is putting up an extremely brave face and feigning righteous indignation over the inclusion of Rajiv in the chargesheet. But apart from heckling Information and Broadcasting Minister Arun Jaitley in his maiden speech and staging a noisy demonstration on the steps of Parliament, the Congress seems to be shying away from a full debate. Rajiv loyalist Mani Shankar Aiyar gave notice of a discussion on the issue in the Lok Sabha but was compelled to withdraw it on instructions from senior leaders. Vajpayee has accepted the need for a debate but there are no takers in the Congress. As for the Left, it is confused, not knowing whether to kick at dynasty or spurn an attempt by "communal forces" to win anti-corruption brownie points.

The issue actually is not any perceived violation of Rajiv's memory. More worrying for the Congress could be the BJP's bid to reduce the whole Bofors issue to Quattrocchi. Apart from Sonia, most of the senior Congress leaders have been adequately briefed by the bjp leadership of the damaging evidence against Quattrocchi. The Italian fugitive's protestations of utmost innocence have been shown to be quite spurious and there is bewilderment at Sonia's inability to distance herself from him. There is trepidation in the ranks at what more documents could end up revealing and there is simmering resentment against Sonia for latching on to the Bofors issue to derail discussions on the party's electoral debacle. The attempts to pin a Hinduja connection to Vajpayee haven't succeeded. Neither have attempts to project the Bofors issue as a hardline Advani attempt to derail Vajpayee's consensus style of functioning. Instead, the BJP senses an opportunity to both embarrass the Congress and keep the party's dissidence simmering.

It's not that the CBI has conclusive evidence to make the Bofors scam a riveting case study of the rampant corruption under a Congress regime. Even if it has achieved a great deal under difficult circumstances, there is more ground to cover. So, why now?

The answer is a blend of law and politics. With courts in India clearing hurdles in the path of inquiries and the Swiss tangles being largely resolved in India's favour, the CBI felt this was the best time. Certainly, both Vajpayee and Advani were surprised at the speed with which the CBI moved after the elections.

Not that the rulers are protesting. The evidence points to an Italian carpetbagger making the most of his contacts to award himself a generous commission in an arms deal. For the public what matters is not that Quattrocchi stashed away a fortune in Switzerland but that his nationality was Italian and that he had free access to the Gandhi household. In the cruel rhetoric of politics, that's what's making the Congress run scared.