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Of Scorpene, Scorpions and the coming 'sting'

Of Scorpene, Scorpions and the coming 'sting'

Author: Sudheen Kulkarni
Publication: The Indian Express
Date: February 26, 2006
URL: http://iecolumnists.expressindia.com/full_column.php?content_id=88597

India's relationship with South Africa is special. Gandhiji's transformation from Mohandas to Mahatma occurred essentially in South Africa. But at a time when a different kind of Gandhi is dominating Indian politics, our two countries seem to share something altogether different - corruption and kickbacks in arms deals.

To know more, spare a moment to know about Scorpene and the Scorpions. October 2005 saw India sign one of its biggest ever arms purchase contracts to procure six Scorpene submarines from Thales, a French company. Size of the deal: Rs 18,798 crore, with a tax component of Rs 3,553 crore. Recently, Outlook magazine carried four sensational exposes, the last of which mentioned an e-mail from Jean Paul Perrier, CEO of Thales, to Abhishek Verma, a businessman who has been previously named by the CBI and Enforcement Directorate in several cases of financial fraud. (Incidentally, he is the one who revealed the name of Vincent George, private secretary to Sonia Gandhi, in a case of amassing wealth disproportionate to known sources of income, which is still pending with the CBI.)

''We confirm the payment of 4 per cent of the Scorpene contract price,'' Perrier wrote to Verma, according to Outlook. If true, the payoffs are over Rs 500 crore. Defence Minister Pranab Mukherjee told Parliament on Wednesday that the deal had no middlemen.(Remember? So had Rajiv Gandhi assured Parliament in 1987 in the Bofors deal, and we know how Mukherjee's government is still moving heaven and earth to save one Mr Q.) If Mukherjee is right, it means one of the two things. Either Thales - which is known to have engaged middlemen and bribed politicians in almost every country it has supplied arms to (it is no different in this regard from other arms suppliers) - has decided to make India an exception to its well-honed business practice; or that Mukherjee's party and government have suddenly decided to become paragons of probity.

The revelations so far raise some troubling questions. Three Navy officers were summarily dismissed in October in a 'War Room Leak'. They were not court-martialled, but sacked under the rarely-used President's 'Pleasure Doctrine', since the ''classified information'' they leaked, after accepting ''gratification'', was ''likely to affect the security of the State''. Curiously, the civilians named by the magazine as having received the leaked information (including information about the submarine deal) have not even been interrogated so far. One of them, a close relative of the serving Navy chief, is said to be linked to Verma, who is alleged to have negotiated the deal ''on behalf of the Congress party''.

Curiously, when Karan Thapar questioned Mukherjee about the 'War Room Leak' in an interview on CNN-IBN, the minister said: ''Why does action have to be taken against them (civilians)? This is commercial information. People want to have commercial information. They deployed their services.''

Cut now to South Africa. In 2002-03, the government of President Thabo Mbeki was rocked by allegations that Deputy President Jacob Zuma took bribes from Thales ($75,500 a year) to shield it from a corruption probe into a $5 billion arms deal in 1999-2000. ''There is no scandal. There is not anybody, anywhere - in South Africa or anywhere in the world - who can produce one single fact to demonstrate corruption,'' Mbeki insisted. ''Our country needs facts, not groundless allegations,'' he wrote in the newsletter of ANC, the ruling party, in May 2003.

However, shocking facts emerged when South Africa's elite investigating unit, the Scorpions, started the probe in right earnest. Zuma was found to be a ''secret shareholder'' in Nkobi, a company owned by high-profile businessman Schabir Shaik, who was involved in the arms deal with Thales. According to South African papers, ''Shaik enjoyed boasting that he had Jacob Zuma in his pocket.'' Jean-Paul Perrier figures prominently in the South African arms scandal. He allegedly approved a pact struck by Shaik and Thales's country head in South Africa to bribe Zuma, in exchange for his services. Thanks to the Scorpion diligent investigation, Shaik was sentenced to a 15-year jail term. Inevitably, the Shaik trial forced President Mbeki to sack Zuma from office.

Thales and Jean-Paul Perrier surface in another major scandal, this time in Taiwan, which bought six warships for $2.8 billion in 1991. As with India, Thales had signed an 'Integrity Pact' with the Taiwanese government, which meant the deal would be void if any middlemen were found. Subsequent exposures revealed that Thales had engaged Andrew Wang, a local agent, to bribe politicians and bureaucrats in payoffs of about $600 million. In a murky twist to the tale, Wang fled Taiwan in 2000 following the death of a navy officer, who was found murdered when he was about to blow the whistle on colleagues for bribe-taking. The scandal became so big that, like V P Singh in the Bofors scam, Chen Shui-bian won the presidential election in 2001 by making the Wang case central to his anti-corruption platform. Taiwan is now demanding that Thales repay $600 million from a slush fund frozen in Swiss banks.

All this shouldn't surprise us. In October last year, Indian newspapers widely reported the allegations of Michel Josserand, former head of Thales Engineering, in an interview to the leading French daily Le Monde, that Thales maintains ''a centralised slush fund to bribe and corrupt officials to win contracts in various countries''. He revealed that the company has ''a secret internal system to pay commissions to the extent of 2 per cent of the company's annual sales ($11.5 billion last year)''. Ethicsworld, a global anti-corruption watchdog body, has named Thales as being involved in the ''world's top 10 corruption scandals of 2006''.

Reacting to the startling exposures in the Scorpene deal, the Government last week referred one part of the scandal - the War Room Leak - to the CBI for investigation. But why, going by reports in the media, has Verma been kept out of the CBI's scrutiny? Also, what about the other part of the scam - the alleged 4 per cent commission from Thales to Verma for swinging the deal? The allegation may well be baseless. But if true, who are the beneficiaries of the payoff? Allow the CBI to have the same independence and stinging power as the South African Scorpions, and there is no knowing who will be India's Schabir Shaik and Andrew Wang, and who'll be India's Jacob Zuma.

write to sudheenkulkarni@expressindia.com

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