Tuesday, 06 April 2021 | PNS | New Delhi
Report based on probe by agency, says Mediapart, but provides no proof
A fresh controversy has broken out regarding the Rafale fighter jet deal with allegations of French manufacturer Dassault paying one million Euros as gift to an Indian middleman. The middleman is already facing charges of money laundering in another defence deal in India.
These allegations surfaced in Mediapart — a French investigative website— over the weekend. The report said the information about Dassault paying money to the middleman came out during an investigation by French anti-corruption agency.
Incidentally, 12 Rafale jets manufactured as per the Indian specifications have already joined service at the Ambala airbase. India and France signed a Government to Government deal worth over 7.8 billion Euros in 2016 for 36 Rafale medium multi-role combat aircraft.
About two years back, the deal faced another storm when allegations came up of an Indian defence manufacturer being favoured in the offsets. The Rafale jet deal has a 50 per cent offset clause wherein Dassault has to plough back nearly `30,000 crore into the Indian defence industry.
In its report on Sunday, the French publication said the deal involved a 1.1 million Euro payment made by Dassault to a middleman in India. The French conglomerate has claimed the money was used to pay for 50 replicas or models of Rafale jets. But the report has not provided any document or photograph as evidence that these were delivered.
“The company (Dassault) said the money was used to pay for the manufacture of 50 large replica models of Rafale jets, even though the inspectors were given no proof that these models were made,” Mediapart reported.
The allegations were first uncovered by the French anti-corruption agency Agence Francaise Anticorruption (AFA) during their audit of Dassault, according to the report. But the AFA “against all apparent logic” decided not to refer the case to prosecutors, it said.
“As they combed through the 2017 accounts, the AFA inspectors raised an eyebrow when they came across an item of expenditure costing 5,08,925 Euros and entered under the heading ‘gifts to clients’,” the AFA report said.
“The sum was indeed huge for a gift. Though French law does not set out precise limits, legal precedents suggest that giving a watch or an expensive meal costing several hundred Euros can be enough to constitute corruption.”
The report said to justify this “larger than usual gift” Dassault supplied the AFA with a proforma invoice dated March 30, 2017, which was supplied by an Indian company called Defsys Solutions.
“This invoice, which related to 50 per cent of the total order, was for the manufacture of 50 models of the Rafale C,” the AFA report said. The invoice suggested that Defsys was paid 50 per cent of an order worth Euros 1,017,850 for manufacturing of 50 dummy models of the Rafale jets. Each dummy, according to the AFA report, was quoted at a hefty price of 20,357 Euros.
Defsys Solutions is run by Sushen Gupta, who is being investigated by the CBI and Enforcement Directorate in the Agusta Westland case involving kickbacks paid in India in a deal for VVIP helicopters. Defsys is one of the subcontractors of Dassault in India. Gupta was earlier arrested in 2019 and granted bail in the helicopter deal case.
The AFA inspectors asked Dassault for an explanation. “Why had Dassault ordered an Indian company to make models of its own aircraft at 20,000 Euros a plane? Why was this expenditure entered in the accounts as ‘a gift to client’? And were these models, each one of which was supposed to be the size of a small car, really ever made?”
According to Mediapart, “Dassault was unable to provide the AFA with a single document showing that these models existed and were delivered, and not even a photograph. The inspectors suspected that this was a bogus purchase designed to hide hidden financial transactions”.
This is the first part of Mediapart’s investigation into a state scandal which also raises questions over the both the justice system and the political authorities.
The report said the Dassault agreed to pay one million Euro to a middleman in India just after the signing of the Indo-French contract in 2016.
The French audit coincided with a tip received by the French public prosecution services’ financial crimes branch, the Parquet National Financier (PNF), in October 2018 which alleged irregularities in the defence deal.
According to the AFA report accessed by Mediapart, Dassault tried to justify “the larger than usual gift” with a proforma invoice from an Indian company called Defsys Solutions. It is reportedly one of the subcontractors of Dassault in India.
Defsys is contracted to carry out maintenance of Rafale simulators at both the Ambala base and the Hasimara base where the second squadron of the Rafale will be based.
The AFA reportedly functions like the Comptroller and Auditor General (CAG)of India. The French body was set up in 2017 with the objective of checking whether large companies implemented the anti-corruption procedures set out under Sapin 2, the French anti-corruption law. However, unlike CAG, the AFA also audits private firms.
According to industry sources, Defsys is not a banned company and does business with various defence companies. They also said Dassault gave around 25 models to the Indian side, which are on prominent display at various locations, including at the residence of top officers.